According to some financial articles, there are a number of stocks that might double in value soon. A few of the companies mentioned include Alcoa (AA), Verizon Communications (VZ), and Netflix (NFLX). While I am no stock picker or financial analyst, the reason for the predictions seem clear: high revenue growth potential.
What is your revenue growth potential? If you are a professional services provider, anything from an independent management consultant to an attorney and everything in between, then you need to focus on the revenue formula.
I don’t know who your ninth grade algebra teacher was and what your relationship was with him or her, but please stay with me. This is as easy as A times B plus C.
- A stands for new clients.
- B is how much you charge per new client.
- C is the amount of money you get from past clients.
- So Revenue = (A x B) + C
Actually, there are two components to new clients: the number of qualified prospects you talk to multiplied by your conversion rate. There are four types of prospects: suspects, tire kickers, referrals and qualified prospects. Here are our definitions.
A suspect is one of the seven billion people on the earth you suspect might be interested in what you do, but all you have is a name and contact information.
A tire-kicker is someone who has taken a step toward you to say they are interested in what you have to say. They may have attended a seminar, came to a speech, visited a trade show booth, signed up for your e-mail newsletter, asked for a copy of your white paper, or some other information gathering activity.
A referral is someone that one of your advocates suggested they call you. They have heard positive things about you and might call you one day.
Now, a qualified prospect, that is a tire-kicker or a referral who calls you and wants to meet with you to hear how you might solve their problem (and how much do you charge).
To recap, here are the formula components.
A = (#QP x CR%) = new clients
B = $ you get per new client
C = $ you get from current and past clients
To illustrate, let’s say you talk to ten qualified prospects per month. You convert 20% (one out of five) into new clients. You charge each new client $1,000. Added to that, you get $3,000 a month from existing and past clients. (Oh no, a word problem. Don’t panic or have traumatic school flashbacks. Please, stick with us.) You make $5,000 per month.
(10 x .20) ($1000) + $3000
(2) ($1000) + $3000
$2000 + $3000 = $5,000
But what if you could talk to fifteen qualified prospects per month instead of ten? What if you could get $1,150 per client instead of $1,000? What if you could convert two out of five (40%) instead of one out of five? What if you could get $3,300 a month (10% increase) from past and existing clients instead of $3,000? All of these increases are actually modest and very doable. See what happens to revenue (yes, it more than doubles).
(15 x .4) ($1,150) + $3,30
(6) ($1,150) + $3,300
$6,900 + $3,300 = $10,200
Voila: You have doubled your revenues.
To recap, here is how to leverage the four factors:
Number of evaluators you talk to each month. Showcase your expertise by hosting seminars, webinars, and teleseminars focused on client pains that you address. Present research on how they compare to their peers. Your book is a credibility tool.
Percentage of evaluators you convert into clients. Use a lead conversion system where you ask the right questions (can increase conversion rates by 50 to 100%). Listen carefully and respond appropriately.
How much you charge each new client. Experiment with three-tiered platinum/gold/silver pricing strategies. Experts can charge more, and being an author helps make you an expert.
How much money you get from past and existing clients. Ask about problems and offer options how to solve. Your best prospects are past clients.
Bottom line: You don’t have to double the number of clients or what you charge to double your revenue.
