PreneurCast is a marketing podcast. Each week, author and marketer Pete Williams and digital media producer Dom Goucher discuss entrepreneurship, business, internet marketing and productivity.
This week Pete and Dom revisit the 7 Levers of Business, their framework for analyzing and improving your business by focusing on the 7 primary elements of every business, then systematically working to improve each one by just 10% for a massive result.
Pete and Dom revisits their 7 Levers of Business framework for improving any business
Transcript:
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Episode 052:
7 Levers of Business Redux
Pete Williams: Hey!
Dom Goucher: Hello!
Pete: One-year anniversary!
Dom: It’s amazing! It’s been 52 shows.
Pete: Haven’t missed a week. How good are we?
Dom: Yeah. Weddings, holidays, bordering on national disasters or at least a distinct lack of internet on my part, and we’ve managed it, 52 shows.
Pete: Fantastic. We covered a lot of ground in the first year of PreneurCast and had a lot of loyal listeners along for the ride, which has been fantastic.
Dom: It has. Welcome, everybody, to this week’s PreneurCast; it’s our one-year anniversary show. We’ve got a little special thing lined up for you, Pete and I, first of all, to say thank you to everybody. So many people have been with us since the beginning, listened to all the shows in whatever kind of timeframe you want to do that. We really appreciate everyone and all your feedback so far. You’ve inspired us to keep going, so let’s do that.
Pete: Was that the big surprise? That we’re going to keep going with the podcast?
Dom: I played with the idea of saying we were packing it in; but no, I think we’re going to keep going.
Pete: Fair enough too, fair enough. So, hey, plenty more exciting weeks, months, and years ahead for PreneurCast. It’s been fantastic for the first 52 weeks as you said, Dom. And yeah, a lot of really cool stuff planned for the next year or so at least.
Dom: At least.
Pete: Mixing it up with you and me as always on the show; but we’re also going to get, or continue to get, some fantastic guests. The real cool thing we’re going to do moving forward is get guests who actually help dig deep and delve into different elements of the main topic for today’s anniversary edition of the show.
Dom: And what might that topic be, Mr. Peter?
Pete: What I thought we’d do is for listeners that have been around for a while, it’s worth rehashing the core of, or what has become the core of PreneurCast anyway. And obviously, for a lot of listeners, it’s worth giving them some context around what we often refer to here on the show as the 7 Levers of Business.
We wanted to just rehash that, delve into it, give it a lot more context around that, a lot more examples, and talk through that because that’s definitely the foundation of what this show’s become known for.
Dom: Absolutely, absolutely. Not only is it the foundation of what this show’s become known for, but it’s the foundation, certainly, of a lot of the work that I do with my consulting clients. I base pretty much every initial triage that I do with a client on the 7 Levers, and that’s proof to me in itself that it’s a valuable model. It’s not just something that we talk about.
It’s not just some harebrained scheme or idea that we came up with, just some fancy name for something. It really does work, both as a focal point for a triage and as a strategy, and a way of picking out your tactics a framework, as we talked about in previous episodes, to measure things against to see what it is you need to do next and how to do it.
Pete: Yeah. I think that’s the biggest principle when it comes to any framework, but particularly the 7 Levers – it has to be something you can continually measure against, but also continually manage. This is something that we keep talking about, and we’ll talk about it more throughout the show today. But what we really encourage people to do is, when they differentiate their ‘on the tool time’ to ‘on the business time,’ and actually have that structure in place, that when they’re working on their business, they’re structured enough to work with a structure.
That might be a rotating seven-week cycle where every week, they’re on the business time, or at least some of it is focused on one particular lever and trying to increase and pull that lever in their business that little bit more. Yes, every business owner has to spend time on the tools working in their business to a certain extent. But you have to break away from that, whether that’s a day a week, a moment a week, a night at home a week away from the office, or time in the office where you got the door locked and you’re working on the business and trying to pull one of the levers.
As we’ll talk about today, if you can pull one of these levers by just 10%, just increasing each lever by simple 10% increments, you’ll find the profitability of your business almost doubling. And this is the crazy thing – so many people try and only focus on one of these levers, which will become clear in a moment, try and work really hard by doubling just one. And doubling anything in a business is really hard. Doubling anything in any part of your life is really hard.
Trying to double your weight, or halve your weight, or halve your run time, or whatever it might be, is really. But losing 10% of your body weight, running 10% faster, lifting a 10% heavier weight, those sorts of things are achievable, and there are so many conversations and arguments and facts and supporting evidence to say that small goals are much more easily obtained and are obtained a lot more because they can be seen. There’s plenty of great case studies.
A time-tested and true one when it comes to business is the IBM salesmen of the ‘80s. The reason they were so successful was because the actual targets they had their salesmen in their nice blue blazers aim for were very, very low. They had no resistance to picking up the phone and making that cold call because they knew that all they’d have to do was make a few calls and they’d make their target.
They weren’t obstructed by this big, heavy, awful, outrageous goal. This is one of the reasons we get so many case studies and feedback from people all across the globe in some random businesses; whether they’re online information marketers, or retailers with a fruit shop, or consultants in service businesses. It’s so easy achieved and so easily seen how you can effectively pull one of these levers by just 10% and reach that goal.
Dom: Cool. There’s the sales pitch; but I think that we need to go back and start with a frame and a context, given that we might have some new listeners on the show, awesome listeners that may just have managed to avoid listening to the 7 Levers episode that we did record all those months ago. We should start by being absolutely clear what it is that we’re talking about when we say the 7 Levers of Business.
Pete: Alright, perfect. Let’s talk through the levers really quickly and then we’ll give some examples of how the math actually works, and do it in a very simple way that’s not scary. Because you mention math, and people start hitting the pause button.
Dom: Yeah. So before we even go into that, and I’m just going to avoid the word math for a little while, what we are talking about here is seven aspects of any business – whether it’s online, offline, bricks-and-mortar, consulting, services, product sales, whatever; seven aspects of any business that you can identify, isolate, and improve.
Pete: Basically, they’re inputs or the drivers of the profitability or the profit of a business.
Dom: Great.
Pete: Let’s run through them. The first is probably the most talked about when people think about what drives profit, and that’s traffic. That traffic can be defined as online visitors. That term ‘traffic’ is being very much used there; but obviously, that term has been derived from foot traffic into retail stores. It could be people calling your business. It’s basically first-time prospects entering your business’s web, and ‘web’ used in the context of marketing web, not internet web.
That’s the first driver of profitability and the first lever: traffic. The second one is opt-ins. Now again, very clear to understand if you’re in that online marketing space where opt-ins are primarily in information marketing; people subscribing to your newsletter or to your database or opting-in with their email address in return for a free report. But what are opt-ins in the real world?
If we look at a retail store, an opt-in might be classed as someone sitting down and trying on a shoe, or trying on a dress, or some sort of active engagement, active reaction beyond the traffic phase or traffic lever. So, someone agreeing to a meeting, someone coming in for a free assessment of your consulting services, whatever it might be.
Maybe it’s a taste test of your particular goods and services that you’re selling in a supermarket; or you may be a catering company, people coming in for a taste test of the food. That’s the opt-in. Every business has that first step they require their prospects to go through to prove themselves as a targeted and relevant customer or potential customer.
Dom: Yeah. Something that you’ve said in the past that I really like as a good definition of that in the real world is somebody that goes past the step of ‘just looking.’
Pete: That’s it. Someone who’s looking is traffic. As soon as they take some sort of active response, you’re absolutely right, that’s an opt-in. And then the next lever, the next input to profitability is the conversions. How many people who have opted-in, who have tried on that shoe, who have tried the sample of cake at the supermarket? Whoever it might be, how many of them have actually taken the next step, opened up their wallet, their checkbook, their purse, get out their credit card, and make a transaction with you?
These are the buyers. How many actually commit to spending money with you? That’s the conversion element. Obviously, that has an effect; the amount of people you actually get from the opt-in stage to the conversion stage affects the profitability of a business. The fourth lever – and the fourth and fifth lever, depending on what day of the week you talk about it, are in different orders; and that is items per sale. This is how many physical items people purchase when they transact with you.
In a retail setting, it’s how many items they put in their grocery bag. How many items are in their checkout cart on an online store? That’s the items-per-sale element. The more items per sale you can actually get a customer to purchase, the higher your profitability will be in the business. The fifth lever, the fifth input is your average item value. This is the average dollar price, or pound price, or sterling price, or whatever sort of currency you’re trading in, value per item.
Obviously, the higher your price point, the more revenue you’re generating; and most likely, the greater profit you’re actually making. To try and actually increase the average item value is a great way to increase the profitability in your business. And then the sixth lever is the amount of transactions your customers do on a particular basis. So whether you’re doing this math on an annual basis, on a monthly basis, on a weekly basis, whatever you’re sort of doing this analysis of your business on, how many times do those people come and buy from you?
If you’re a petrol station, obviously, that might be once a week or once a month they might come back and fill up their tank again. If you’re an accountant, it might only be once a year when they get their tax return done. Well, what else can you do to increase the amount of transactions those people do with you? The more they transact the more revenue you generate and the more profit you make.
And finally, the very last input or factor to profit is your margins. This is the net margins your business makes, and this includes everything from the actual cost of the goods to your overheads and your staff. What is the net profit your business makes on the average transaction? So, that’s it; they’re the seven factors that make up profit of a business. No matter which way you cut it, no matter which business you’re in, they’re the seven inputs that affect profit.
Dom: And as I said, and as we say all the time, this is both a framework to guide you, but also a great starting point as a triage for your business. Because something that we say, and a lot of people say this and it’s one of the truisms of business, is you can’t manage what you don’t measure. So the first thing to do is to go and get the numbers for your business in each of these seven areas, right?
Pete: Absolutely, that’s where you go to start. All this sort of random stuff you’re measuring in your business, in most cases when we talk to people and consult with people through masterminds and programs and whatever it might be, they’re measuring the wrong stuff. They’re measuring all this other random stuff in their business, which in certain circumstances makes sense.
If you’re drilling down on one of these levers, you may want to get a bit granular with your measurement. But if you’re not actually looking at the seven drivers of profit in your business and measuring those, how can you manage your overall business? You’re going to be too focused and too narrow in your focus. There’s no other way to really say that.
Dom: Yeah, and it’s one of those things. A lot of the time, when we talk to people they are heavily weighted in their focus. You said this earlier on, which is the most common focus for anybody certainly in an online business or that has an online business for that business, the primary focus is traffic.
And they’re obsessed by their traffic numbers and increasing the amount of traffic to their website. But just focusing on that is very often a red herring; it’s certainly not giving you the full picture of your business or the full picture of the opportunity that is there for you to improve your business.
Pete: Yeah. And this is, I guess, the biggest, or one of the biggest; it’s one of the keys to the 7 Levers of Business. We’ll go through the math in a moment and show how powerful this is. But as we said at the start of the show, trying to double one of these things, which most people solely focus on, “I need more leads. Give me the good leads. I need more traffic. I need more foot traffic. I need more phone calls.”
Very, very hard in most circumstances to double the amount of business or leads you’re currently getting. Whereas, if you’re going to devote that same amount of effort across all these 7 Levers and just increase each of them by 10%, you’ll actually get the same revenue profit result as you would have working your guts out, trying to almost impossibly double the traffic of your business.
Dom: Absolutely. And we are going to work through this and it’s absolutely shocking. The first time that I did this, Pete and I did this together; and the first time that I saw these numbers, it’s absolutely shocking. It’s a really important point, and this is really the cornerstone of the 7 Levers of Business and why we try and anchor quite a lot of what we talk about to the 7 Levers. Take any one of the things as an example. Take traffic as an example.
Doubling the amount of traffic in any context is a very, very, very difficult thing to do unless your traffic is already miniscule. If you have one persona a day and you want two, you’ve got a chance, for example. But when you’re into the hundreds or thousands, doubling those numbers is incredibly difficult. It’s hard work. It takes a long time, probably a lot of money, certainly in the online world, improving your traffic or increasing your traffic.
One way or another, you’re going to have to spend some money and hard work, a lot of effort, and a long time for a result. Whereas, back to Pete’s point about small goals that are easily achievable, we’re going to go through some numbers or show you that a 10% increase across the board, and as Pete suggested that’s maybe looking and focusing on one of these things once a week for seven weeks in a cycle.
But a 10% increase across the board, which isn’t a difficult thing to achieve, will pretty much get you the same result as doubling any one, for a lot less effort, a lot less time, and very often a lot less outlay. And it’s when you see these numbers you can actually work it through, preferably with your own numbers, that this becomes quite a powerful thing because you see that you can have a big effect on your business with a small effort.
The other thing, another example; traffic’s a good one. But also, for example, what if you doubled your prices? What if you doubled the price of your product overnight? That’s quite a big thing to try and do, quite a big thing to try and get across to your clients. But a 10% increase is a lot easier to achieve. And that’s really the mindset that we’re trying to build here.
Pete: Absolutely. And this is the beautiful thing, as the numbers will show; again for a lot of people, just increasing the profitability of their business by 25% is a good result on an annual basis or a particular period of time as they focus on this. You can do that by only pulling these levers a little bit, not even pulling them 10% will still give you across the board a much better profitability of the business. So, let’s show you some numbers. Let’s talk through this and give some examples of how this actually works and how the math is very easily achieved and understood.
Dom: OK. Now, one of the big differences between this edition, this go-through of the 7 Levers that’s different to the last time that we did this was that one of our listeners, Lee Turner, has very kindly put together an online tool so you can literally play along at home. If you go to 7LeversCalculator.com, you can put your numbers in online, into a box: traffic, opt-in rate, conversions, average sale value, average items per sale, average transactions per customer, and your profit margin; and calculate your profit at that point.
Then you can tweak any one of those numbers, and immediately see the difference that it will make to your bottom line. You can literally play along at home as Pete and I go through this example now. You can see the numbers change right in front of you. And it’s a fantastic tool; it’s really, really powerful. It’s very simple; there’s literally just the seven boxes and a calculate button. But I do recommend that you do this, either with our example or on your own numbers because it’s a very powerful thing to see.
Pete: Absolutely. So let’s run through it. These are going to be some random numbers that may be close to your business, they may be nowhere near your business. The actual numbers we put into the calculator are irrelevant. If you’re a student of mathematics, you know it’s not about the input; it’s about the formula that actually is the consistent thing here. Whether these numbers change a little bit, the actual result of profitability and the increase in profitability will be proven here.
That’s the only technical, jargon-y flag I’ll give. Let’s run through this as an example. Let’s start with traffic, that’s the first of the levers. Now, in this hypothetical business, let’s say it had 100,000 visitors, whether that be visitors to the website or foot traffic into the clothing store. Over a 12-month period, which is the period we’re going to work on here, it’s had 100,000 visitors.
If that store or website has an opt-in rate of 20%, so 20% of the people who walk into the dress store try on a dress; 20% of the people who come to the website opt-in, give their email address, subscribe to the newsletter and download the free report; that equates to 20,000 opt-ins. That math’s pretty straightforward; isn’t it, Dom?
Dom: Even I can keep up.
Pete: Perfect, good start. If we now go to the next lever and say, what percentage of those people who have opted in show an interest, go and be on the looking stage, that actually then purchase? Let’s say, again, they have a 20% conversion rate. They’ve had 100,000 visitors, 20% of those or 200,000 people have opted in.
And of that 200,000, 20% have decided to purchase and transact with the company. The result there is 4,000 buyers. So out of the 100,000 visitors they had, they’ve now got 4,000 customers or clients who’ve actually spent money and transacted with them. Pretty straightforward?
Dom: So far so good.
Pete: Beautiful. Now, if we say, “What is the average items per sale this store makes?” So on average, someone comes into the store and they buy 1 dress. They don’t buy anything else; on average, there’s just 1 item per transaction per client. They buy a dress, nothing else. No perfume, no makeup, no purse, no bags, nothing. Just 1 dress, all good. That means they still have 4,000 items sold. Again, what is the average item value here? Well, let’s say for example, the average item value is $100. The dresses are $100.
They sell an eBook for $100. They sell a pair of headphones on an ecommerce website for $100. Whatever the product is, the average item value is $100. If they’re only getting 1 item per transaction, and the average value is $100, they’re only making $100 per transaction. If you times that by the 4,000 customers we spoke about earlier, that gives a revenue of the business of $400,000. 4,000 customers times $100 a sale is $100,000. Is that right? Am I doing the math right there?
Dom: Yeah, 4,000 times 100 does come out as 400,000.
Pete: I’m heading in the right direction.
Dom: As I say, even I can follow along.
Pete: So let’s move onto the sixth lever. This is the sixth input that affects the profitability of a business, and that is the number of transactions per client per period. How often does that young lady or male come back to the dress store and buy another dress every year? Is it a 1 transaction per year kind of store? Let’s, for this example, for this store, say yes it is. They don’t come back. It might be an accountant; they only come back currently once a year to do the tax, that’s all they do with you.
Again, your revenue’s still only going to be $400,000 a year because they’re only buying 1 item for $100 once a year. That gives you a $400,000 revenue still. Now, what’s your margins? For want of a better example to make the math nice and easy, let’s say the profit margin is 50%. So, at the end of the day, 50% is your profit margin. With $400,000 in revenue that then generates a profit of $200,000 for the business owner. All pretty clear and simple? Nice easy numbers, nice easy math?
Dom: Yes, easy to follow along. Especially if you do follow along and type these in at 7LeversCalculator.com, you can see these numbers in front of you. And then when we change them, you will really see the effect.
Pete: Exactly. So you can calculate and it will break it down here. It will show you you’ve got 20,000 prospects or opt-ins. It’ll show the 4,000 customers, the revenue of $400,000, and the profitability of $200,000.
Dom: The important thing here is though that these are really simply five numbers to make the math easy to follow along with a piece of paper, like I have to. Because obviously, I can’t take my shoes and my socks off at the same time, it just doesn’t go. But these numbers are just numbers to follow to show a principle. The calculation, as you say, is the same calculation. Put any numbers in you want, the real numbers from your business are the best ones to put in.
Pete: Exactly. And for want of a not exactly correct mathematical term, it’s almost the compounding of this. If you think about this, they’re not isolated levers. Every one of these elements and inputs that affect profitability are greatly affected by what came before it. Obviously, the higher the opt-ins you have, the more prospects you have to actually convert. They actually all affect each other.
If we now look at increasing each one of these levers, each one of these inputs, just pulling it and increasing it by just 10%, what is the flow and effect that your business will actually have from a profitability perspective? Let’s walk through this using the same foundation numbers, but let’s say over a seven-week period; a seven-month period might even be a better way to see it from a tangible and believable perspective. If over the next seven months, you just spend one month at a time working on each one of these levers and pulling it a little bit harder.
Let’s increase traffic in the first month, because we focused diligently on a regular basis on a set structure to try and increase our traffic by 10%. Over that period of time, we’ve been able to increase our traffic, the amount of visitors to our website, the amount of foot traffic into the store, by just 10%. So we’ve gone from 100,000 visitors to 110,000 visitors. Very, very easy to do. Maybe you’re doing AdWords right now; throw up some advertising on Yahoo and Bing. That’ll probably get you a 10% increase.
Maybe doing some SEO, doing some better branding outside of your retail store. Putting out an A-frame on the street has shown to double – and this is I know in rare circumstances because the starting point might be a bit low – but putting A-frames out can get more traffic; doing leaflets, radio advertising. There’s plenty of different ways to generate awareness and traffic through business. Getting a 10% increase is very achievable, so you could increase that by 10%. So if we then-
Dom: Now – sorry – before we do go on, it’s very important just to go back to the core point that you made earlier, which is the compound nature of this. Because we are getting more traffic, it’s feeding more numbers into the system and it filters down and down and down, and down. So for example, a 10% increase in traffic has given us 220,000 in profit. It happens to have given us a 10% increase in the profit.
Pete: That’s because everything else is constant. So your conversion rate hasn’t changed, your transaction value hasn’t changed, nothing else has changed.
Dom: And this is where that common thing – and we’ll talk about this at the end – this is where the common reason for the focus on traffic. People see that you increase traffic and you put the traffic into the system, then the output increases. But what we’re going to show you now is that if we just tweak each level of this system by that 10%, the compound result is huge. So we started with the 10% in traffic, let’s go on into the 10% on opt-in rate.
Pete: We’re going to try and increase and work on our business in this second month or second focus session, whatever it might be. We’re going to try and increase our opt-in rate from 20% to 22%. That’s a 10% increase, because it’s actually a 10% increase on the 20% in isolation. We’re not trying to go from 20% to 30%; we’re trying to increase the opt-in rate in isolation by 10%.
So 20% to 22% conversion rate. Now, by having a higher traffic number to start with and increasing the opt-in rate to 22%, that gives us 24,200 prospects to sell to. It’s not just an increase of 20,000, it’s actually a compounded increase. We’ve got more traffic and a higher conversion rate; so that’s the increase you see, thereby increasing two numbers at once by just 10%.
Dom: Yep. And let’s carry on through because we’re trying to prove the point of this cascade. But I want to get to the result because it’s the result that makes me excited.
Pete: Alright, so let’s run through this. If we increase our conversion rate from 20%, again, to 22%, we’re going to increase our average items per sale from 1 to 1.1. So, a 10% increase there. All that means is every 10th client is now purchasing a second item. It means over 10 transactions, you sell 11 items, which is quite easy to do. Every 10th person just buys fries with that, that gives you that 10% increase. The fifth lever is your average item value.
So, increase your price by 10%; and there’s plenty of ways. We can talk about that in future episodes and we have done in past episodes, particularly the recent Pricing episode here on PreneurCast, how to actually increase your price in various ways by 10% justifiably. So, we increase that by 10%. If we also work to increase the transactions per period by 10%; again, every 10th client comes back a second time in that particular period of time.
If you’re an accountant, you get every 10th person to not only do the tax with you but come back six months later to do a tax planning session to be ahead of the game. So, you’re actually enticing people to come back more to do additional transactions with you. And then finally, if you can increase your profit margin by 10%. So, we’re going from a profit margin of 50% to 55%. We’ve now increased each one of these 7 Levers by 10%.
We have pulled them all, just slightly increased them by 10%. What you see across the board is now 110,000 visitors to the website, 24,200 opt-ins. Take those opt-ins and increase the conversions by 22%, your result is 5,324 customers. So, a significant increase from the original 4,000 customers we had. Then we’ve got an items per sale increase to 1.1. That’s now 5,856 items sold in a particular period of time. If we increase the average item value from $100 to $110, that gives us a revenue to date of $644,160. Am I doing the math right there, Dom?
Dom: My notes match up with yours so far.
Pete: Beautiful.
Dom: We are rounding these by the way.
Pete: Yes, we are. We’re not talking about the cents and the points and stuff like that; I’m just going to round up. The next one is if we increase the transactions per period. So, we go from 1 to 1.1 transactions per client per period. The revenue increases again, obviously because they’re spending more money with us in this period of time. That revenue now becomes $708,576.
Finally, if our margins have increased from 50% to 55%, that leaves us now with a net profit of $389,716.80. If we can roughly round that to $390,000, give or take a little bit of course, that is almost double the $200,000 we started with originally before we actually pulled any of these levers. It’s virtually doubling the profit of a business by only increasing seven things by 10%. It’s not a 70% increase, it’s almost a 100% increase in the profitability of a business.
Dom: Absolutely. The big message here is that we did that with small increments at each stage instead of focusing on, for example, doubling the traffic, which in the same period of time would be very difficult to do and cost you a lot of money. But as we talked about in previous episodes, things like increasing your price by 10% is a relatively straightforward thing to do. Increasing your conversions, it can be a simple thing to do depending on your business.
A lot of these things can be affected with a very small change in your business, or a very small bit of staff training. Changing your opt-in rate can literally be down to coaching your staff to ask questions. Conversions can be increased by, again, coaching your staff to be more consultative with their selling for example, and that will absolutely increase things like average items per sale and so on and so on. Each one of these things is quite easy to address to get a 10% increase.
Pete: And this is the biggest thing – sorry, I’m just going to jump in there for two seconds and talk about the measuring stuff that you alluded to earlier, Dom. For so many people and so many people that we work with and do consulting with and mastermind groups and stuff like that, just by measuring and focusing on each of these before you try and implement anything and actually pull harder, you’ll actually find in a lot of cases in at least two if not more, and so often every single lever, there’s just 10% leakage right now.
Just by when you look at taking the time to count and measure the traffic element, you just clearly see where there is a lot of leakage. Maybe you’ve got a silly little keyword running in AdWords, or a keyword that is paused that’s not getting you any traffic, or you look at measuring your margins and you just clearly see that your supplier is charging you for something that you shouldn’t be charged for. There are so many places where there’s just leakage currently in your business.
We should really delve into this leakage element and conversation and point in a separate PreneurCast episode in the future; and I think we will because just leakage can be costing you 10%. So, without even doing anything proactive, just reacting to the leakage will give you this huge increase in the profitability of your business.
Dom: That is actually a really important point and I’m really glad you brought that up. We might call it different things, but leakage is what it is, where you’re letting some of one of these elements go. You’re letting potential things, you’re just letting people potentially walk by your store just for the simple reason that there’s nothing actually in their line of sight that lets them see that there’s a store there, like an A-frame.
You are literally letting people walk past; it’s leakage of a kind. Things like with the margin. Margin is how much of the sale is profit. That’s not mark-up, it’s how much of the sale is profit. You do have to take into account all aspects of your business, like is your business wasting money? Are you paying out for services that you’re not using? Are you paying too much for a service?
Because that’s all eating away at your overall margin for the year. And yeah, it’s great; I think absolutely we should come back and cover this on another episode. I think once you’ve gone through the 7 Levers, go through your business using the 7 Levers as a kind of a triage map, and even if you just get these figures, the first thing it will do is make you look, and it will make you think in isolation about each of them.
One of the most common things online, for example, is people who want an opt-in. They want somebody to maybe subscribe to an email list, but that subscription box isn’t actually visible on the page. It’s not obvious, it’s maybe down at the boom of the page. So just looking into these things and going “OK, what are my numbers?” and bringing it into awareness can have a positive effect.
And then you can start looking for things like leakage before you even start looking for positive activity to move forward to increase. And I found that a lot; I actually found that with a lot of people that we’ve worked with, that just going through this list, just the act of observing and measuring these has made a positive difference to their business and the way that they run it.
Pete: Yeah. I was trying to think of the really coherent and articulate saying that’s exact what you’re talking about; something like ‘what you focus on expands.’ So just by focusing on each one of those things, you’ll realize there are leakages. You’ll be looking at it and going, “Oh my God, why aren’t we doing this? How can Julie not ask, ‘Would you like fries with that?'” That’s part of the process. That’s part of sales training. But she doesn’t actually do it. I only realized that she doesn’t do that when I actually measured how often it’s been done and what the actual items per sale were.
So, “Hey, Julie, don’t forget to start doing this and start asking for fries with that because you should be doing that.” Suddenly, you’re getting a 10% increase in your items per sale. Because people aren’t doing what you think that they’re doing so many times. Measuring really identifies that really clearly without you having to think of anything huge; just cracking the whip on stuff that you thought was already there.
Dom: Or, things that you tug and never really thought about. A lot of people wouldn’t keep track of things like average number of items per sale.
Pete: Absolutely.
Dom: And so it wouldn’t occur to them because they haven’t tracked it, that they could increase that number, even by a small amount. As you say: One extra item every ten people is all it takes, across all calculations. And this is really, I guess, the point. This episode is getting close to time; the point we’re making here is the 7 Levers is a very simple way of looking at a very deep and powerful topic. It can literally double the profit in your business with small steps.
But as well as being a way, a map, and a strategy, and a framework for you to follow to do that; you can use it to evaluate your business. You can look at where you are right now, you can measure and monitor things using these metrics. And at each level that we go through: traffic, opt-ins, conversions, items per sale, item value, transactions, and margins, there’s so much that can be done, so many simple things.
We talked about some today, like observing leakage and plugging those holes, looking to see if people are actually doing the things that’s part of their training. The training was there for a reason, they should be doing it. All this is a huge topic, which is why Pete and I have talked about it element by element over the past few months of the show.
And I think we’re going to continue to talk about it, we’re going to use it as our focal point and try and delve into these, and try and also bring in people that maybe have either applied this or can speak to one of these elements in more depth to help you out and to give you some tips to help you move your business forward.
Pete: Exactly. I’m super excited to do this because there’s plenty of experts out there in each of these topics. We’re going to get them on the show, pick their brain, get them to add value and give you some ideas at least to get you thinking in the right direction.
Dom: So, Pete, do you think it’s time to unveil the surprise?
Pete: Is this an anniversary gift?
Dom: Well, I don’t know that it’s a gift, but it’s definitely-
Pete: Knowledge is a gift!
Dom: Knowledge is a gift.
Pete: The opportunity to learn and grow your business is a gift, Dom. Don’t ever forget that.
Dom: OK, folks, you’re probably aware – hopefully, you’re aware – that a few months ago Pete and I ran the very first ever 7 Levers Mastermind where we invited PreneurCast listeners and members of the Preneur Community to join Pete and I in our regular calls, and have Pete and I basically consult on your business one-to-one, and also part of a group setting, to help you and get you absolute direct consulting to address each of the 7 Levers in your business.
It was a great success, we had fantastic feedback. Everybody involved had amazing results. Some of the results we talked about, the 40% or 50% increase in some levers with very simple techniques, came from people that are part of that Mastermind and from either the ideas that the team themselves generated or things that Pete and I suggested. And everybody had really positive results, and we really enjoyed it.
Now that takes up a lot of time. We’re very happy to do it, we really enjoyed it, and we’re going to do it again. So that’s surprise Number 1. But surprise Number 2 is there’s always limited seats on the Mastermind. Pete and I only have so much time, and we want to give massive value when anybody does join in with the Mastermind. So we limit the number of people that can join in so we can focus our efforts. But we understand that the 7 Levers of Business is a very powerful thing, and it’s a huge topic.
We’re going to move forward with this over the next year of PreneurCast. We’re always going to be coming back to this. But if you want to get basically the best of our brains condensed on the subject of the 7 Levers and how you can address each one in your business with specific examples, work-throughs, and just the collective mind of Pete and I on this subject so far, we have put together a training course, and we’re going to be releasing it as our one-year anniversary of PreneurCast. You can follow the link in the show notes, and go to- is it 7Levers.com?
Pete: It is, it’s over at 7Levers.com.
Dom: That’s the number seven, 7Levers.com. There’ll be a link in the show notes, but 7Levers.com. You can go there, you can see what’s in the product. It’s going to be a product produced by me and Pete, so you’ll be able to see my amazing video production skills that we talked about last week, and listen to Pete’s dulcet tones a little bit more, where we literally do delve down into huge detail into each of the 7 Levers. There’s a review of the 7 Levers overall, plus individual training for each of the 7 Levers with ideas and worksheets for you to basically work through.
Do that regular once a week or once a month thing, working through, look at our ideas, work them through with your business, and improve your business. And as you’ve seen with the numbers we’ve done, if you go to 7LeversCalculator.com and try it for yourself with your own numbers, you can double the profit in your business just by increasing each one of those by 10%. That’s why we’ve put this training together. We really want to reach out and make sure that as many people as possible can really achieve this, can improve their business by as much as possible with the small little steps of effort.
So, 7Levers.com, go on and have a look. Hopefully, it’s something that you guys want to sign up for and hopefully, you’ll give us some feedback and let us know how you get on. We really believe that you’re going to get some great value out of it.
Pete: And the beautiful thing about this, and the thing that I love about the 7 Levers as a framework and principle, is it’s not really like a new shiny bullet or anything like that; it’s just time-tested business and marketing principles that work from a math basis. When you break it down – as much as people hate math, that’s all that business is, it’s just a series of inputs that generate a big, hopefully huge, dollar value numerical output.
So if you’ve got other courses that you’ve invested in and things like that that haven’t really got the actual result you want from those, it’s quite possibly because you’re not quite sure how to actually apply them to the business. And by having the 7 Levers program as a framework, when you come across other products in the future or products you’ve already got, you can already plug that into a particular lever and get a clear outcome of what you’re trying to do. Like, “This is the lever I’m trying to pull.
OK, how can I best pull that? Can I reference some books or some courses I bought previously?” or whatever it might be. Having this structure to build your business on is such a powerful and almost freeing platform to stand on, because you know that everything that comes across your desk, whether it be opportunities to market a business or product or anything like that, you just know that you’ve got a framework to stand on.
With a strong foundation and framework, you can build the tallest of towers. And that’s what the 7 Levers is meant to be for everybody, and that’s why we’ve spent some time and actually delved into each one of these to give a much more holistic view and in-depth action plan, and a whole bunch of ideas and action points and implementation-based things that you can do. No matter what business you’ve got, whether you’re in online marketing or retail or services, we’ll spend time and actually delve into each of those amongst each lever.
So you’ve got plenty of actionable things you can do and take from every week or every month, or every session you want to spend working on your business, applying and pulling these 7 Levers. It’s all there for you inside 7Levers.com, so definitely check it out. It’s something we’re very proud of. We’ve been working on it for a while and we do think there’s a huge amount of value in there to give you the tools you need to not get distracted by the next shiny tool or anything like that, and just really work solidly on your business.
As you’ve seen in today’s show and throughout the rest of the episodes we’ve had for the year to date, how easy it really is if you have the right context and frame to increase the profit of your business. It’s such an easy thing when you apply the 7 Levers and just pull them very slightly.
Dom: That’s right, and it’s a great point that you make. The course is a stand-alone course and program that you can work through. There are practical examples for every type of business on how you can pull the levers, each one individually, that little 10% or more. Some of the things we talk about in there are incredibly powerful. And if you focus on them and consistently do them, you’ll get more than a 10% increase.
But Pete, you’re absolutely right; not only is there information in the course specifically about techniques you can do, but the course itself and the program itself is a framework. And if you reach the limit of what it is that we’re teaching about in the program or if you have got some material about how to do something specific, whether it’s copywriting to improve your conversions or it’s the economic running of a business to improve your margins.
Whatever it might be that you’ve invested in or are thinking of investing in, it fits into this framework. This framework is a foundation for you going forward, and to focus that effort rather than just be focused on traffic or just be focused on conversion. It just keeps you with that whole view of the business and make sure that you’re working across the business, which will give you a much bigger return.
Pete: Absolutely, that’s exactly right. Looking forward to seeing you guys over at 7Levers.com, and obviously looking forward to talking with you guys for the next 12 months, for another 52 episodes of PreneurCast.
Dom: Indeed. Thank you everyone for listening so far, and continue listening. Continue giving us your feedback on iTunes and over at PreneurMedia.tv. And keep an eye on PreneurMedia.tv because things are going to be happening.
Pete: There’s some very exciting news coming down the pipe. And speaking of coming down the pipe, next week we have an interview with a person who goes by the name of Unorthodoc. It’s all about health and well-being for entrepreneurship. So I think for a lot of us, particularly myself who experienced getting sick on my honeymoon because I was working so hard leading up to that, it’s a very cool conversation that I had with Cory.
It’s about all things health, food, nutrition, diet, sleep, and all those relevant inputs that make you as an entrepreneur healthy and functioning at the best of your abilities. Check that out next week. It’s going to be a fantastic episode.
Dom: Great. Once again, thanks to everybody for listening. Pop over to 7Levers.com and have a look at the 7 Levers of Business program that we’ve put together. Hopefully, it’s something that you’re interested in and interested in signing up for. See you next week.
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Links:
Online:
http://www.7levers.com – Pete and Dom’s 7 Levers of Business Training Course
http://www.7leverscalculator.com – The 7 Levers online calculator
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