Managing a business involves a continuous effort to ensure business growth. Intuition has always been hailed as the foundation of success, but is it? Growth is the primary goal that we all set ourselves in business management.
We can be amateur business visionaries, little retailers, incredible skippers of industry, consultants, or specialists, yet what we go for the gold is the accomplishment of consistent and maintainable development of our business. Yet, how to make the circumstances for development? How to set up our company with the executives with the goal that our business’ improvement isn’t taking a risk?
Strategic planning for the growth of a business is often undermined by the daily commitments that fill our agendas, which too often distracts us from looking at the situation of our company as a whole. This limits us and drives us away from developing our business to instinct alone. Every day we see large companies and entrepreneurial realities (including personal ones) celebrated as great intuitions, but often this is not the case. Indeed these realities are rarely the result of instinct alone. Great professional and entrepreneurial careers are usually the results of an exemplary method!
Like a good study method, a suitable working method is based on continuous and persistent work that looks far away but plans every little step that leads to the horizon. A convenient way puts you in a position to learn more with each step and take advantage of that competence for the next steps. A great idea can make you take a giant leap, but a suitable method can make you take many small steps every day, far outstripping the growth a single good idea brings. Furthermore, an exemplary method guarantees continuous and organic growth, a fertile and ideal environment for birth, and a maximum intuition yield!
The best and most straightforward I have learned to date is the “Circular Method,” divided into six simple steps: Analyze, Hypothesize, Test, Learn, Improve, and Repeat.
- Analyze: in this phase, you select the “field” in which you want to grow (turnover, revenues, number of customers, average receipt, the average number of products per order, personal free time …) and analyze the information in our possession. to have a precise picture of the situation linked to the specific field of growth.
- Hypothesize: once the analysis is finished, it is necessary to set a precise goal to be achieved, a hypothesis of what is believed to be achievable. The view must arise from the results of the analysis previously performed.
- Evidence: the implementation of the hypothesis to try to reach the set goal. In short, get to work! At this stage, it is essential to remain firmly linked to the plan envisaged by the hypothesis.
- Learn: at the end of the operational phase (Test) of the implementation of the hypothesis, and it is necessary to verify what the results of the idea were and to understand what went well and what went wrong, what could have been done better, what worked and what did not work.
- Improve: We apply what we learned to the hypothesis to look for a more truthful “prediction” and sensible goals.
- Repeat: once we have reached the improvement objective, we start again by analyzing a new “field” to set up updated goals, try, learn …
A suitable working method allows you to fully understand all the variables that contribute to or oppose the growth of your business.
A Practical Example
I am an entrepreneur at the helm of a retail business of organic soaps and detergents for the home and the person, I have a good loyal clientele who buys an average of 1.2 times a month in the store, but I would like to be able to increase the frequency of purchase in a way to reduce the time between one purchase and the next, thus allowing me to improve incoming liquidity and have the opportunity to increase sales.
- Analyze: from the internal analysis, I find that, on average, each loyal customer buys 1.2 times a month, and the average receipt is € 42. Usually, 50% of the monthly revenues are produced in the first ten days of the month and then gradually decrease up to the end of the month. Among the various products I sell, there are some (let’s assume that they are called: Bal, Bil, and Bol) that I sell in small quantities but always in combination with products with more significant turnover (the products: Max and Top).
- Hypothesize: there are two areas I can work on; one is pricing (pricing strategy) the other is product communication.
- Suppose I create special offers on Bal, Bil, and Bol only in the third week of the month and communicate them effectively to my customers in the first ten days. In that case, I will be able to make customers come back more frequently to take advantage of the offer and, at that moment, try to sell them too. Other products. In this way, I could reduce the value of the average receipt (I do not expect the second purchase to be of the same value as the first) but significantly increase the number of average monthly assets of my customers.
- Suppose 100 customers make an average of 1.2 monthly purchases of an average value of € 42 today, bringing me € 5040 to the cash desk. I raise the monthly purchases to 1.7 by lowering the average receipt value to € 32. In that case, I can take an excellent € 5440 to the checkout. ‘8% more.
- Proof: I carried out the hypothesis for three months.
- Learn: after three months, I take the sums of my business, discovering that I have managed to raise the monthly purchases to 1.5 by lowering the average receipt value to € 35 bringing € 5250 into cash, or about 4% more. The Bal, Bil, and Bol products attracted some customers to return for the offer but sometimes only to take advantage of the discount and not in the expected percentage.
- It gets better: maybe the simple offering on Bal, Bil, and Bol products was weak, and next time I need a bigger hook that pushes more customers to come back. Perhaps by linking the offer to purchasing another more interesting product such as Max or Top.