====== How to Grow a Business ======

{{keywords>Growing a business, offtoa, paid growth, assumptions, growth engines, lean startups, Eric Ries, viral growth, organic growth, marketing, sales, sticky growth, stickiness, Dave McClure, prospecting, AARRR, Bessemer Venture Partners, customer acquisition, sales funnel, customer acquisition cost, CAC, retention rate, churn, sales cycle, viral coefficient, attrition, freemium}}

Only three ways exist to grow your company's revenue:

1. **__You can spend money to create awareness__** within your target market about your product offerings, how your products (and you) are different than competitors, your prices, and generally driving traffic to you (physically or virtually) where potential customers can learn even more about you. Dave %%McClure%% calls this lead acquisition in his AARRR model; others have called it prospecting; many call it simply sales. \\  \\  Once you acquire a lead, you can also spend money pushing potential customers through the sales funnel, a concept originally proposed by E. St. Elmo Lewis in the late 1890's, e.g., converting 10,000 leads into 500 prospects into 100 revenue-producing customers. [[http://www.bvp.com/sites/default/files/bessemer_top_10_laws_ecommerce_oct2010.pdf|Bessemer Venture Partners]] calls the ratio of the leads to customers the conversion rate. \\  \\  Typical expenditures are advertising, Google %%AdWords%%, writing blogs, sending emails, buying mailing lists, creating a website, search engine optimization, and labor for sales and marketing personnel. In most cases, a linear relationship exists between the expense and the resulting revenue, although many techniques exist to improve the linear relationship and thus one's performance. Eric Ries calls spending money on these types of items the //paid growth engine//; when you control such spending to be a fixed percent of your previous period's profits, it becomes a //sustainable//  growth engine. \\  \\ __How to Use Offtoa to Drive Unit Sales from Marketing and Sales (non-Labor) Expense?__  \\ - Click on Assumptions/Costs/Other Expenses. \\ - Select an expense item that you want to spend money on, or if the one you want does not already exist, add it to the list of items. \\ - Enter the dollars you want to spend each year for this expense item. \\ {{ :business-planning:expnse.png?nolink&800 |}}\\  - Click on Assumptions/Revenues/Sales Models. Select the sales model called "Market and Sales Dollars Spent to Drive Sales". From the pull-down list, choose the expense item from the previous step. Tell us how many sales and marketing dollars will need to be spent in order to sell one of these units to a customer. \\  \\  \\ __How to Use Offtoa to Drive Unit Sales from Marketing and Sales Labor Effort?__  \\ - Click on Assumptions/Costs/Personnel. \\ - Select an employee type that you want to use to drive revenue (typically a salesperson), or if the one you want does not already exist, add it to the list of personnel. \\ - Enter all their information, especially their annual salary, which will be used in the next step. \\ - Click on Assumptions/Revenues/Sales Models. Select the sales model called "Market and Sales People Effort to Drive Sales". From the pull-down list, choose the employee type from the previous step. Tell us how many units can be sold per employee per month. \\ [[http://help.offtoa.com/lib/exe/detail.php?id=business_planning:how-to-grow-a-business&media=business_planning:bu2-dollars.png|{{  :business-planning:bu2-dollars.png?800  }}]] \\  \\ __How to Use Offtoa to Drive New Customers from Marketing and Sales (non-Labor) Expense?__  \\ - Click on Assumptions/Costs/Other Expenses. \\ - Select an expense item that you want to spend money on, or if the one you want does not already exist, add it to the list of items. \\ - Enter the dollars you want to spend each year for this expense item. \\ - Click on Assumptions/Revenues/Sales Models. Select the sales model called "Market and Sales to Drive New Customer Acquisition". From the pull-down list, choose the employee type from the previous step. For the CAC, tell us how many sales and marketing dollars will need to be spent in order to capture one new customer. \\ [[http://help.offtoa.com/lib/exe/detail.php?id=business_planning:how-to-grow-a-business&media=business_planning:bu3-cac.png|{{  :business-planning:bu3-cac.png?800  }}]] \\  \\ __How to Use Offtoa to Drive New Customers from Marketing and Sales Labor Effort?__  \\ - Click on Assumptions/Costs/Personnel. \\ - Select an employee type that you want to use to drive revenue (typically a salesperson), or if the one you want does not already exist, add it to the list of personnel. \\ - Enter all their information, especially their annual salary, which will be used in the next step. \\ - Click on Assumptions/Revenues/Sales Models. Select the sales model called "Market and Sales to Drive New Customer Acquisition". From the pull-down list, choose the employee type from the previous step. For the CAC, tell us how many salary dollars will need to be spent in order to capture one new customer. 

 2. **__Viral effect__**. You can create incentives for current customers to refer others to become customers. Although this activity also costs money, the relationship to results in unlikely to be linear. Dave %%McClure%% calls this //referral // in his AARRR model.\\  Eric Ries calls it the //viral growth engine//. Typical programs include ones in which customer success depends on attracting new customers, explicit referral programs (e.g., where a customer receives an incentive for referring another customer), or simply providing a great customer experience, so happy customers tell their friends about you or post great reviews about you on the web. \\  \\ __How to Use Offtoa to Create New Customers via Viral Growth?__  \\ - Click on Assumptions/Revenues/Sales Models. \\ - Select the sales model called "Market and Sales to Drive New Customer Acquisition". \\ - Enter the viral coefficient and length of viral cycle to describe how many new customers each customer refers and how long it takes them to do the referral. \\ [[http://help.offtoa.com/lib/exe/detail.php?id=business_planning:how-to-grow-a-business&media=business_planning:bu3-viral-1-.png|{{  :business-planning:bu3-viral-1-.png?800  }}]]   

 3. **__Organic Growth__**. You can take actions to retain existing customers, increase their average order size and increase how often they purchase. For (almost) all businesses, the easiest sale is a repeat sale from an existing customer because in most cases it requires no additional effort on your part. Some call this the //stickines// of the business. [[http://www.bvp.com/sites/default/files/bessemer_top_10_laws_ecommerce_oct2010.pdf|Bessemer Venture Partners]] call the inverse of stickiness //churn//; others call it //attrition//.\\ Programs to increase organic growth include frequent buyer rewards programs (e.g., like those used by all airlines and hotel chains), upsales (i.e., convincing customers of lower priced products to purchase higher priced products), freemium pricing (deliberately offering free services as an incentive to encourage some customers to see how valuable the premium and paid services would be), increasing the average order size during any one visit, increasing the number of visits per time frame, or simply providing a great customer experience so that customers are reluctant to ever take their business elsewhere. \\  \\ __How to Use Offtoa to Create New Customers via Organic Growth?__  \\ - Click on Assumptions/Revenues/Sales Models. \\ - Select the sales model called "Market and Sales to Drive New Customer Acquisition". \\ - Enter the average order size, periodicity, and retention rate to describe how many how large an order each customer makes when they make a purchase, how often they make a purchase, and what percent are still customers after 12 months. \\ [[http://help.offtoa.com/lib/exe/detail.php?id=business_planning:how-to-grow-a-business&media=business_planning:bu3-sticky-1-.png|{{  :business-planning:bu3-sticky-1-.png?800  }}]] \\  Note: Some of the above has been extracted from Davis, A., //Will Your New Start Up Make Money//?, Scrub Oak Press, 2014. {{indexmenu_n>5}} \\