1. Marketing plans and not aligned with business goals.   For instance, say you have a goals to grow top-line revenues by 50%. (Only 50%?  Well, it is a recession.)  In Formula 5 terms, that would mean a three-part combination of strategies to improve pricing and margins, monetization of each customer, and of course, lead generation.   Most business owners never think this way. They never try to figure out what it will take to reach that 50%, in action-oriented terms.

Work backwards from the goal. Ask the question, what will it take?  Which parts of the business would be most amenable to improvement?  Once you figure that out you can take the next step.

What can you add to your value proposition to justify a price increase – and how much could you add?  What can you sell to your existing (and very happy) customers?  Do you have that product or service? If not, what’s the plan to create it?  What about new leads?  Can you amp up your existing programs, or do you need to create new channels?

Create goals for each of these three improvement programs, with detailed action steps.  Get busy meeting the business goals.

2) Not measuring the right things to reach those goals.  Most business owners don’t keep good track of their marketing activities so they have no idea what’s what.  Online marketers tend to be better, but not that much.  As the old saying goes, if you don’t know where you’re going, any road will take you there.  If you don’t keep careful track of things, you are unable to take the right actions, and you never know if you’re on or off course.  And if all you’re looking at is number of new leads and conversion rate – well, that’s not bad, but it is just not enough.

Understand your  Customer lifetime profits,  average customer life, purchase frequency, and average transaction size.  Add to that your conversion rates and cost of customer acquisition by marketing channel, and you know everything necessary to drive the business results.  Without every one… it’s sort of like driving your car without a gas gauge.  Would you do that?

3) Not knowing the cost of your goals, and not spending to reach them.  This is the one almost every small business owner makes, and many large ones as well.  Want to grow your business by 50%?  Have you bothered to figure out that you need to advance $100,000 on lead generation and spend another $100k on product development and $50k on customer service to reach that goal?  Do you have the cash or credit to do this?  Most people never bother to figure this out which results in many business growth plans stopping short. And failure to execute always leads to failure.

Address each of these mistakes and you have a much higher chance of reaching your growth goals.

I’ve been wracking my brain to find a new one, but there’s no way around it.  Although there are hundreds of specific approaches, when you distill them all down, there are only three ways to expand a business.  Three main ways, and only three.  What are they?

1. Sell more to your existing customers
2. Find more new customers
3. Merge or acquire your competitors

You might ask, “What’s the point of talking about three when there are ‘hundreds of specific approaches’?”  That’s a reasonable question – it’s easy to think consolidating them obscures the opportunity.  But in fact, it’s just the opposite.

You see, most people don’t think much — about anything — and when they do they don’t never pay attention to how they’re thinking. So they never develop tools for how to do it.  Generalization is one of those tools. Generalization allows you to crunch (maybe it’s the opposite of crunching) a whole bunch of information into a few manageable pieces you can more easily manipulate in your mind.

That’s what we’ve just done here. Now that you realize there are only three ways to grow a business – whether you are measuring growth by sales, or cash flow, or profits, or market share, or number of customers… whatever, you can examine each of these three more carefully and see how they apply to your business.

And that’s what you should do next.  At least, that’s what I tell all my high-paying clients!

I read your article on Value Proposition and ROI. Your examples deal with physical products. I coach people in so-called ’soft skills’ – presentations, speaking and listening, enhancing imagination. I can detail many positive outcomes but do not know how to quantify the results of such training. Therefore I don’t know how to use the methods you suggest. Can you help me?

Since this is such an important question, I thought I’d post my response here:

I know it sounds unreasonable, but you’ve got to be able to put a number on it. The reason “soft skills” people tend to charge less, and earn less, is because they don’t go through the exercise of pinpointing the value.

If someone becomes a stronger speaker, how much will it impact their speaking fees? And if they don’t charge for speaking, what do they hope to get from that improved skill? What will the downstream effects be? Will they sell more, or perhaps gain support for important ideas or campaigns? Why do they want to be a stronger speaker, anyway? You must have an answer to the question, “why do it?”

At some point, if the “soft skill” doesn’t lead to an increase in productivity, and somehow profits – why are they trying to learn it? Why should the invest?

Let’s take the idea one step further to something as abstract as “enhanced imagination. “ Why should someone pay you for this? While it might seem obvious, you want to make sure what’s obvious to you is explicit for your potential client. The answer the comes to my mind is that enhanced imagination will lead to more effective product development, or stronger sales presentations — something like that. Which in turn will lead to something that either earns income or saves income. But that’s in my mind – what is in theirs?

You may think it is unreasonable – crass even – to try to reduce everything to dollars and cents, but if it doesn’t come down – in some way – to a return on investment, why should a business, or a business person, spend their money with you. If it’s not commercial– it’s not a business. It’s a hobby. An avocation. A pastime. But then you’re in a whole different kind of market, and a completely different selling proposition. Businesses are in business to make money, and if you’re soft skill doesn’t help them do it, they should spend their money on something else. When you can clarify how your services do that, the sky’s the limit.

Ray’s response? 

“If we can’t do it by offering a better fifteen-cent hamburger, by being better merchandisers, by proving faster service and a cleaner place, then I would rather be broke tomorrow and start all over again in something else.”

He said that positioning was dead because the people, the users, the community… they were creating the positions of companies by participating in Web 2.0. He believed that companies’ positions were defined by what was being said about them in the infosphere.

This is total nonsense. While Web 2.0 gives people a voice and amplifies the conversation, you have to ask where the conversation comes from in the first place.

Look–most people, bloggers included, want to be lead. They want to be told what to think about and how to think. Then they can react and respond, but not until then. It’s very rare that people initiate the conversation. Those who do are called “thought leaders,” everyone else is part of the crowd.

Positioning is all about framing a context that defines what people need to think about. Positioning is about providing the seeds that ultimately flower into conversation. Reasonable people take the seeds and help them germinate. Unreasonable people create the seeds. Good positioning unreasonably tells people what to think in the first place.

Web 2.0 is a fabulous development in how people and businesses communicate. It’s like going from a one-way street to multi-lane boulevard. Just don’t get deluded into seeing this as creativity. Most of the time it’s just traffic.

That’s what makes them unreasonable.

1. Sell more to your existing customers
2. Find more new customers
3. Merge or acquire your competitors

You might ask, “What’s the point of talking about three when there are ‘hundreds of specific approaches’?” That’s a reasonable question – it’s easy to think consolidating them obscures the opportunity. But in fact, it’s just the opposite.

You see, most people don’t think much, and when they do they never pay attention to how they’re thinking -so they never develop tools for how to do it. Generalization is one of those tools – a powerful one allows you to crunch a whole bunch of information into a few manageable pieces you can more easily manipulate in your mind.

That’s what we’ve just done here. Now that you realize there are only three ways to grow a business – whether it’s sales, or cash flow, or market share… whatever, you can examine each of these three more carefully and see how they apply to your business.

And that’s what you should do next.

I just got a copy of Loral Langemeier’s new Cash Machine For Life, and it’s pretty neat.  It lays out a step-by-step foundation for building a real business that can provide cash flow and profit for a long, long time. I call it get rich slow – definitely counter-trend.

The book covers a lot of ground, from idea generation and brainstorming, finding a model of what you want to create, setting up a plan, building a team, marketing, sales, operations, finance – the works. My own Earn Twice As Much With Half The Stress, covers some of this same ground with exact step-by-step formulas – but Loral does it differently. If you or someone you love “needs” to build a business, first try to talk them out of it. But if they’re really serious, get them this book. Loral can be found at http://www.liveoutloud.com/blog/.