Dan Pena’s Quantum Leap Advantage Guthrie Castle Group

5/23/2008 7:35:38 PM

During my first meeting with a client, I outline the potential ways of growing a business. A business can grow either internally through marketing or externally through acquisition.

Internal Growth

When discussing internal growth, I describe three ways: (1) Increase the number of customers, (2) Increase the average transaction value, and (3) Increase the frequency of repurchase.

Increasing the Number of Customers

Increasing the number of customers is the one aspect of growth with which most business owners are familiar; however, adding new customers to a small business can be risky.

The risk can occur when the sales department, which is not trained in marketing techniques, is assigned the task of developing new customers; however, the risk is minimized—if not eliminated—through the use of proven marketing principles.

Professional marketing techniques will bring new prospects in the door; good sales people can then convert those prospects into new customers.

Increasing the Average Transaction Value

Business owners frequently overlook the internal growth method of increasing their average transaction value, or sale, out of habit. At some point in the past, they established an average transaction value, and consequently, it was never questioned.

The business owner expects the customers to buy what they have always bought, and he does not attempt to change the process. This process can actually erode the customer base since they are not being offered anything above and beyond an average service.

Systematically offering more product and services to your customers increases the average transaction value and is a risk-free way to increase the bottom line.

Increasing the Frequency of Repurchase

Increasing the frequency of repurchase is another overlooked internal growth method for increasing revenue. In an established business, an average customer purchasing cycle has been developed and (like the average transaction value) is rarely questioned.

More often than not, purchasing cycles are left in the customer’s hands. The business owner waits for the customer to buy and has no organizational strategy for inducing a higher frequency of repurchases.

Instituting a program of consistent communication with existing customers is a step toward increasing repurchase frequency.

External Growth

When a client and I consider external growth, I point out that only one method exists: acquisition, which is defined as purchasing another company and their existing customer base.

Beginning the Path

Their next question is a practical, “How can I make an acquisition?” The problem here has been that buying businesses is both a science and an art—a delicate balance that cannot be simply explained in a few brief sentences; therefore, I tell them that AMC has searched for someone we felt was qualified (as well as willing) to teach external growth. The search proved formidable; very few of the people who teach external growth have actually practiced what they preach. The people who have done it don’t usually teach it.

AMC searched the world for the appropriate candidate and ultimately found Daniel S. Peña, Sr.—a man who walked his talk.

Discovering the Source

Dan founded a natural resources company in 1982 with $820 and through acquisition, he grew his business into a $400,000,000 public company within eight years. He has personally raised over one billion dollars for his own business enterprises. Dan coaches entrepreneurs about how to grow their businesses exponentially. He’s chairman of over 20 companies, one of which is on Inc. magazine’s list of the 500 fastest growing companies in the US.

AMC concluded that anyone who has personally raised a billion dollars could teach us valuable business techniques.

Learning the Method

AMC began marketing Dan’s training programs in 1996. He holds seminars several times throughout the year in Los Angeles, CA, Europe, and Australia. The three-day “boot camps” are designed for business people interested in learning how to buy businesses and/or how to prepare to “go public.”

Taking New Action and Getting New Results

By the end of the first meeting with my client, he is ready to take new action. That action may be to institute one or all of the three methods of internal growth: increasing the number of customers, increasing the average transaction value, and/or increasing the frequency of repurchase, or he may choose to learn more about external growth by investigating QLA products or by attending one of Dan’s seminars. Each business owner’s needs are different, and AMC’s goal is to help meet and fill those needs.

Tim Cohn is a Google Advertising Professional and author of the book For Sale By Google.