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There are 28 million small businesses, but 23 million of them make under $45,000 a year in gross sales. I don’t know about you, but I didn’t get into business to make less than the average household income.

So I why do businesses struggle when it comes to making money? One of the many reasons small businesses fail to grow is they simply don’t have a plan for growth. They take their eyes off of the target and miss it more often than not.

After working with hundreds of businesses in the past 5 years, I’ve realized that we’re pretty bad at setting clear revenue targets. When we do set a target, we take our eye off it for too long and we start drifting. In this post, I’ll share the simple yet often overlooked starting point of growth.

How I Almost Bought A Hummer When I Was 10

Ok, I honestly feel extremely short of buying a Hummer, but there’s a lesson here! Read all the way through.

I became an entrepreneur by default, hustling since I was 3 when I would grab customers by the hand and take them to my mom’s food stand in Mexico. It was a way to survive and it was our shot at having something more. Looking back, this taught me the basics of business and money.

One particular summer though, at age 10, my mom made Mexican food to sell at construction sites around the Seattle area. I would spend my days watching over my sisters while she was away and I would run my little Mexican candy business.

One day, as I was taking inventory of my candy and watching TV, a Hummer advertisement came on. Remember those big yellow gas guzzling SUVs? As a 10 year old, I thought it was the coolest thing in the world!

It looked unstoppable, a beast running over the mountains, and I stopped counting my candy and focused entirely on the ad. At the end of the commercial, there was the price – $50,000 – which was around two years of income for my family at that time.

But for a 10 year old, $50,000 was just a number. I sat in our living room for the rest of the afternoon figuring out how many pieces of candy I needed to sell to have enough money to buy a Hummer. Once I figured out my plan, I ran to my mom and told her about it.

She laughed.

The goal was insane, especially because my family couldn’t even afford to buy me a bicycle nor a full happy meal at McDonalds for all of us.

Even if I bought the Hummer, I obviously couldn’t drive it. But I didn’t care. I could wait five years until I got my driving permit. I was determined to hustle and make it happen.

So my mom decided to help me out and she made some extra snacks for me to sell. I was going to buy that Hummer.

That summer was my most profitable summer ever, and even though I only missed my goal by $49,000, it was a blast trying to reach it. I was able to buy a kitchenette for my sisters to play with and a bike for myself. We lived in a pretty rough neighborhood though, so my bike was stolen in five days flat. I don’t think I’ve ever owned a bike since, nor do I want a Hummer anymore.

The story may seem trivial, but it highlights an important point for any business owner.

I’ve personally repeated this same process every year since (and I’ve gotten better at hitting my sales goals). As a kid, and even now, it wasn’t really about the money or the Hummer, it was about something cool I wanted, a crazy dream, and having the vehicle for achieving it (my business).

Figuring out this sales and marketing stuff has the power to change your life. But you need to set clear revenue targets and do the math.

DO THE MATH + SET CLEAR TARGETS

Revenue = Average transaction x number of customers

This is the same approach I’ve used for multimillion dollar companies. Yes, it’s that simple, yet I’m amazed at how few business owners actually take the time to set concrete goals and sales quotas. From doctors to accountants, from mechanic shops to flower shops, the common request is, “I want more clients!” Then I ask, “How many more?” The answer is more often than not, “As many as I can get.”

Tony Robbins says when we ask for stuff, we’re not specific enough. A lot of us say, “I want more money,” and life says, “Here’s $1, shut up and get out of here.”

As leaders of our companies, we need to set clear targets. If you don’t know the target, how will your team know? Work for any sales organization or team and you’ll see they track these on a daily basis.

The first step to actually acquiring customers is to figure out the basic growth metrics and targets. Figure out:

1. What are you selling? What products or services are the most profitable for your business? What’s the quickest way to the cash? If you’re trying to kickstart sales or turnaround a business, this is a perfect place to start. Your business may offer 60 different products or services, but only 20{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502} of them account for 80{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502} of the revenue. Take inventory, find the winners, cut the extra weight. When Steve Jobs returned to Apple in 1997 amidst declining sales, his team was unable to explain why they had so many different products. Unable to find a good answer, he cut 70{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502} of the products and went to work on the core products that eventually made Apple great. It cleared the way for the iPod, iTunes, the iPhone and the iPad.
2. How much are you selling it for? There’s always someone who will be willing to sell your product or service for less. Don’t play that game if you’re a small business. There’s no inherent value in being cheap. Instead, figure out how to provide more value for your clients. One of the fastest ways to make more money is to simply charge more. Most business owners are simply afraid to really charge what they’re worth because they don’t want to turn away clients.
3. How many sales do you want? Set monthly, quarterly and yearly goals. Then we can start figuring out a marketing plan for making sure we attract enough leads and prospects to your business.

Once you have that part done, then you can start gathering more data and tracking the key metrics on a weekly and monthly basis:

1. The number of leads your business gets.
2. The number of total sales:
   1. Number of transactions
   2. Average transaction price
3. Your sales conversions: Out of every ten people you talk to, how many actually become clients?
4. Average customer value: How much does a customer, on average, spend on your products or services in a year?

The easiest way is to define the desired revenue and input the average transaction price to see how many sales you need to reach your goal.

For example, if a plastic surgeon would like to reach a $1,000,000 yearly gross revenue, and his average procedure is $3,000, he’ll need 334 patients to reach his goal. This can be the same for a cosmetic dentist.

Pretty simple, but you’ll be surprised how many people don’t set simple goals like this. When they do, it lives in a spreadsheet buried in their computer. They take their eye off the target and at the end of the year, they’re wondering why they’re not where they want to be.

As their marketing partner, our job would be to identify the top most profitable procedures he does and that he actually enjoys, then focus on marketing those.

If we raise his average procedure price or we market higher priced procedures, and we factor in a one year follow ups, we can easily increase the total patient value from $3,000 to $10,000. In this case we only need 100 patients to reach the goal. This also allows us to figure out the maximum price we’re willing to pay in marketing to acquire one patient.

If his sales conversions rate is 10{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502}, then he needs 1000 leads to get these 100 patients. Is this doable? Is his sales process in place? Is his staff properly trained to handle the volume of inquiries? How can we increase the conversion rate to 15{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502} or 20{3a2c4a0805d1010346945af56d6c7f7373ea77d542a39d135c91600d098c4502}?

Actually seeing the numbers on a regular basis will give you the clarity you need to rethink your approach. You’ll be able to decide if you need more clients, have your existing clients buy more often, or increase the prices and have your existing clients pay more for your products or services.

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