We have have had a shop for 16 years. During that time we built a successful shop business, closed it after 14 years and started another one. We were able to grow our second business much more rapidly than we had the first, using what we had learned. There are a bazillion business books out there. I know, because I feel I must have read most of them by now. (Spoiler: I haven’t.)  No matter how many courses you attend, no matter how much money you spend on training, no matter what you read anywhere, this one principle remains true. There are only Three Ways To Grow Your Shop Business.

There are only 3 Ways to Grow Your Shop Business 

I came across this concept many years ago, and it really struck a chord with me. Our first shop (Little Sunflowers Childrenswear) had had a slow start, but our sales accelerated dramatically once we got our heads around this principle. Applying “the 3 ways” consistently is why our second shop (Almost Off Grid) grew so much more quickly than our old one. We simply applied these principles from Day 1.

This enabled us to achieve the same turnover in 3 years as it had taken us 8 years to reach in our Little Sunflowers business. And then exceed it. Which we continue to do to this day. It was like magic.

Whilst you may have heard this idea before, you may not know who came up with it originally. I’d love to say that I did… but that wouldn’t be true. Jay Abraham is a business coach and author, best known for his work in direct response marketing in the 1970s. Jay Abraham’s theory goes like this. Most businesses focus on growing their customer base only. When we thought about it, that is precisely what we had done in the first 4 years of our retail business. We focused on finding new customers which is, of course, very important. But if you focus on that plus two other things, your business will grow much more quickly. 

The Three Ways to Grow your Shop Business 

The three ways to grow your business are: 

  1. increase the number of customers you have 
  2. increase how much they spend with you, and 
  3. increase the frequency with which they buy from you. 

To put this in a visual way: 

Customers x Spend x Frequency = Sales

Customers Spend FrequencyIf you’re thinking “well Bev, that’s obvious”, you’re right. It is obvious. However most businesses, especially in the early days, focus on growing their customer base only, ie the number of customers they have. They usually forget about the other two numbers, or certainly don’t pay much attention to them.

We call this this Rapid Growth Formula. We have spent years built processes and actions around it, which you could say became our Rapid Growth Road Map. Once we’d used it in our first business, we were able to apply it to our second, even though it is in a totally different sector. This enabled us to grow much more quickly the second time around. 

The Magic of the Rapid Growth Formula 

Let’s imagine we’re a business with 500 active customers. Those customers spend £50 every time they shop with us, and they shop with us twice a year. In that example, the formula looks like this:

500 x £50 x 2 = £50,000 total sales.

If we go out and find 5% more customers, ie 25 more people, our formula then looks like this:

525 x £50 x 2 = £52,500 total sales. 

However, if we increase the number of customers AND how much they spend AND how frequently they shop with us, the numbers start going up much more quickly.

In the following example, we’re going to increase our number of customers by 5%, the amount they spend by £5 (10%) and we’re going to get them to shop with us 3 times a year, instead of just twice.

525 x £55 x 3 = £86,625 total sales.

By simply getting 25 more customers, getting them to spend £5 more each time they visit, and getting them to return to us 3 times each year instead of twice, our sales would increase from £50,000 to £86,625.

That is a dramatic increase in turnover for what could be, in reality, very little work. If you had a goal to increase your number of customers by 5%, get them to spend £5 more each time they came and get them to shop with you once more each year, this would enable you to have laser-like focus on the actions you needed to take. You would be focused on actions that would increase the amount your customers spent and how many times they shopped with you, rather than simply trying to increase your customer base all the time. 

And if there were only 2 of you, like there are of us, this would be a much more effective way to use the limited resources you have to ensure what you’re focused on makes the maximum difference to sales.

Some of the initiatives you implement might take a bit of work upfront but, once they’re in place, they will continue to work the magic for you with very little effort going forward. And by planning to increase the numbers in these three areas rather than just one you are, in effect, compounding the benefit of the actions you take. Which is really good news when you are a small business with limited resources. A scrawny goat, you might say. 

Actions which drive the Rapid Growth Formula 

When the penny dropped for us around 10 years ago, we finally stopped using the scattergun approach in our business. We started working on initiatives that not only increased the number of customers we had, but also how much they spent and how often they came back to our shop. We went on to apply these principles to both the actions we took, and the content we created whether they be blog posts, broadcast emails or advertising. We streamlined all our activity outside ‘the day job’ of packing orders under these three headings instead, bolted on some other things and that gave us a road map for our focus.

We use the Rapid Growth Formula in our business to this day. Examples of activities and content to drive each part of the formula will vary from business to business, but they work in all of them. Believe me, when you start to really think about it: there are masses of actions you can take in these three areas of your business. 

We drew up a list of all the actions we could take in each of the 3 areas. We then picked off a couple a week to focus on. We bolted on what content we created to in these areas. We have been adding to it for years. So at this point in our retail journey, we have a massive list.

It serves as our roadmap to continue growing this business, and any further business we may choose to start in the future.

What the Rapid Growth Formula Means for your Business 

In your business, the focused actions you could take might include the following: 

Increase Number of Customers: Having live, accurate listings on Google my Business and Bing so local customers can easily find you. 

Increase Customer Spend: Upselling, cross selling and bundling. 

Increase Customer Frequency: Implement a loyalty programme. 

Thinking in this way enables you to get a laser-like focus on the actions you need to take to grow your business in a step-by-step way. No matter how small you are.

We are living proof that it enables you to drive growth in your business quickly, even with extremely limited resources. 

A real life example of how we applied this concept

When we were thinking about how to impact the “Increase Customer Spend” element of the formula in the early days of our shop, we worked out our average sales figure for the previous year. You also can do this by working out your total sales over a period (say 12 months), divided by the number of individual sales you had during that time. That figure is your average spend.

In our case, we discovered our average customer was spending £28. Some spent £100+, some spent £9. But on average, they were spending £28 per visit. Our aim was to increase that to at least £30 spend per customer. 

So we introduced a loyalty card with the specific intention of driving up that spend per customer. When a customer spent £30 or more, they got a stamp. When they had 6 stamps, the card turned (as if by magic) into a £20 gift voucher. So the £30 spend wasn’t an arbitrary amount we plucked out of thin air. So often you see loyalty schemes that follow similar principles of ‘spend this much and get a stamp’, but they are not driving anything other that frequency of visit. This scheme was driving spend as well as frequency.

Shop Loyalty Card Example

Within a very short time, we noticed the average spend in our shop creeping up. You would be amazed what people will do to get a loyalty point. In the case of our childrenswear shop, all they had to do was add a hat (for example) to their purchase and they went over the magic £30 threshold.

At that time online loyalty programmes were rare and with good reason: managing an online loyalty programme manually is a complete nightmare! This was in the days before off-she-shelf ecommerce websites, and we didn’t want to spend the money on any site development until we knew it would work. And yes, it absolutely did work.

It was only after we had done this that we realised how difficult it was to spend exactly £30 in our shop. Most people in reality were spending a bit more than that to get their loyalty point. As a consequence, our average spend went up to around £32. That is a 14% increase on one element of the formula. And it happened very quickly. When I tell you that we went on to implement changes which affected the other 2 numbers in the formula at the same time too, you can imagine how things were for us. The growth was so much more dramatic using the ‘geometric increase’ principle (ie increasing all 3 numbers at the same time) than just one of them.   

Don’t ask me about managing an online loyalty programme manually with hundreds of customers for years though. I really don’t want to talk about it.

Anyway check out Goaty McGoatface learning about the fact that (all together now) there are only three ways to grow your shop business!