On this episode: The key to having a great night’s sleep…

I’ve worked with loads of different businesses over the last 13 years, and the thing that I’ve noticed is that the businesses that are the most challenging to grow, the ones that keep their owners up at night, are those with lumpy cash flow or unpredictable profit. These are businesses that have low purchase frequency, in other words, businesses where their customers only ever buy from them once or very rarely.

The problem with this is that your marketing has to work so hard to give you your customers and to help you achieve your targets. You effectively start from zero every single month. So, if your business is this type of business, what are you going to do about it?

You need to try and find a product, a service, or a revenue stream that will give you some form of repeat purchasing. In an ideal world, you want to set some targets for what percentage of turnover you want from repeatable business. Now, the gold standard in this is to try and find something that you can have contracted in or something that can be a subscription, because that will give you stability.

I know that this isn’t straightforward. There will be some businesses out there scratching their heads, thinking, “How am I ever going to do this? No one ever does this in my industry.” Frankly, if you want to have stable cash flow, if you want to be able to grow your business, if you want to afford to invest more in your marketing because you have a good lifetime value from your customers, this is something you’re going to have to get your head around.

Grab your team, sit down, and brainstorm some options. If you are fortunate enough to have a business that does have a good degree of purchase frequency, then you need to understand if you are focusing enough of your marketing on increasing that purchase frequency. Again, can you benefit from introducing contracts, retainers, subscriptions? It is so much easier to get more from your existing customers than to find new customers.

A surprising number of businesses that know this do not focus enough of their internal marketing on their existing customers; they’re always chasing new customers out there. Now, the benefit of having a business with a good stable degree of repeat revenue, or contracted revenue, or subscription revenue, is that it makes your company more valuable.

That is the key thing. It’ll help you invest more in your marketing, it gives you stable cash flow, it means you can start the quarter with a certain percentage of your revenue already baked in. But the key thing is, it will make your business more valuable. If you take two businesses with the same level of turnover, the same level of operating profit, but one business has to eat what it catches and the other business has 60% of its revenue already contracted in or on subscriptions, it’s going to be the latter business that is the one I would want to buy.

So, wherever you are on this continuum, your challenge is to get more from your existing customers and to increase purchase frequency. Because that, ladies and gentlemen, is one of the key ingredients to having a brilliant night’s sleep when you’re a business owner.

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