Part 4 of The 4, and Only 4, Ways to Grow Your Business

by MHolland | Mar 28, 2025 | Business Tips, Cash Flow, Systems

The following is a reprint of a Four-Part series of Blogs I wrote in 2028.

In the previous 3 Blogs I wrote about the first 3 ways to grow a business, any business.

Way number 1 is to increase the number of customers/clients (of the type you want)

Way number 2 is to increase the transaction frequency (or in business terms, the number of times they buy)

Way number 3 is to increase the average value of each sale.

And, way number 4 is to increase the efficiency of how you do the first 3.

The measurements of the first 3 ways to grow your business are a breakdown of what is in your total sales figure:

Number of active customers

X

Number of times they shop/buy

X

The average sale per transaction

=

Total revenue

All 3 of the above can be measured and when you increase each one as an independent strategy you can achieve some explosive growth!

So, you may be wondering….

How Do You Measure Increasing the Efficiency of Your Systems?

The measurement for the efficiency of your systems is the cost per transaction.

For your variable costs it is your gross profit margin.

For your fixed expenses it is the total fixed costs divided by the number of transactions.

And, this is where it can get very slippery!

Because we all know that Profit is equal to Revenue less Expenses, then it would seem that the way to increase profit is to reduce expenses!

And this is a huge mistake, if applied without further thinking …

Even Huge Companies Really Get This Wrong

I read the other day that stock repurchases (something that was illegal under SEC rules in the past) are all the fashion in the public company world.

In other words, large companies increase stock value by using internally generated cash to buy their own stock back.

This increases the share value, and then the Executive stock options are worth more, which they cash in on.

Do you see a motivation here?

All this is done at the expense of the people who are generating the bulk of the share value – the people who work there.

So, am I saying that a business should not reduce its costs?

No, I am not. What I am saying is that a company must use a different way of thinking when they examine each cost of the business…

Before Axing a Cost, You Must Ask These 3 Questions

As I mentioned above, because revenue – expenses = net profit, it would seem logical to think that reducing expenses will increase net profit.

And, this would (in most cases) be totally wrong.

Why?

Because costs drive value.

I will repeat that – costs drive value.

And if you reduce them willy nilly, you will end up cutting the heart out of the business, and revenues will eventually, sometimes quickly, decline with the cost-cutting.

There are 3 Vital Questions to Ask Before Eliminating or Reducing any Expense

They are:

1. Does this expense help to increase sales?
2. Does this expense help to increase Return on Investment?
3. Does this expense help to increase cash flow?

If the answer is “no” to any of those questions, then either cut it, or replace it with a lower cost alternative.

Let’s look at some simple examples. Take rent – perhaps you are in a high-traffic location for a retail store and you are paying $500 a square foot. You find another location for $250/ square foot.

If the high-traffic location can generate more than twice the sales per square foot, then it is a better investment than the lower cost alternative.

Coming back to my example of the share re-purchase schemes by public companies. Imagine that they – instead of buying back their own shares – invested in better infra-structure, team training, and higher wages. Perhaps those drivers of value can result in higher sales and thus higher net profit.

From the higher profit, dividends could be paid to the shareholders, and everyone wins.

The Best Way to Create Effectiveness and Efficiency is Systems

 As Michael Gerber said in his underground bestseller, The E-Myth, the systems are your business.

Put another way, without good systems, there is just you, “doing it, doing it, doing it”. You may be good at the technical work of the business, but that is not what is required to create a sustainable business. For that you need systems!

Your systems must revolve around what your customers truly value so that you can deliver a consistently awesome product or service in a manner that has people feel cared for and appreciated.

Start by flow-charting every vital customer-centric function of your business, and eliminate steps that add no value, and add steps that do.

One way to find out what your customers value is to run a Client Advisory Board, where you meet (or rather someone else meets with them rather than you as owner, so they will be more honest) with a select group of your best customers and ask them what is working and what is not working in your business.

It takes guts to do that, yet most good(A) customers will not trash your service offerings – they will offer constructive feedback that will help you run a better(and hence more profitable) business in service to them.

Thanks for reading….

Pricing Strategies to Outmaneuver Inflation

by MHolland | Feb 7, 2025 | Business Tips, Cash Flow, Systems

Inflation and rising costs can seriously erode your businesses profits…

Now the very real threat of a 25% tariff on all goods exported to the USA will squeeze profits for businesses selling across the border.

For family-owned businesses, where relationships and long-term stability matter, the challenge is even greater. A misstep in pricing can erode trust, while failing to adjust can eat away at profits.

The good news?

Smart pricing strategies can help you stay ahead. Here is how you can outmaneuver inflation and tariffs while keeping your business healthy and competitive.

Understand Your Cost Structure in Detail

Before making any pricing decisions, get a granular understanding of your costs. This means knowing not just your direct costs (materials, labor) but also overhead (rent, utilities, software subscriptions).

• Action step: Review your cost structure monthly to spot trends and pinpoint where inflation is hitting hardest. This is one step we do monthly with our clients in our Controller’s meeting.

Use Strategic Price Increases

Instead of across-the-board price hikes, implement targeted increases that align with value perception.

• Increase prices on high-demand, low-elasticity products/services—those your customers cannot easily replace.
• Offer tiered pricing—keep an entry-level option affordable while adjusting premium offerings to reflect value.
• Gradual vs. one-time hikes—small, incremental increases over time can be more palatable than a single large jump.

Improve Pricing Psychology

Consumers do not always respond rationally to price changes. Leverage pricing psychology to maintain sales.

• Charm pricing: A price of $97 often feels significantly lower than $100.
• Anchoring: Show higher-priced options first to make standard offerings seem like a great deal.
• Bundle services/products: Customers are less sensitive to price changes when items are bundled together.

Lock in Long-Term Contracts with Suppliers

Negotiate multi-year agreements with key suppliers to lock in better rates and protect against sudden cost spikes. Consider bulk purchasing or forming partnerships with other businesses for greater buying power.

A well-known cliché – lean and mean – applies now to overhead. Look at all your fixed costs and ask – do I need this now? If yes, can I get it for less with another supplier, and not lose the quality I need?

• Action step: Review all supplier contracts and identify opportunities for renegotiation.

Introduce Value-Added Services Instead of Discounting

Discounting can erode margins and set customer expectations for lower prices. Instead, add value in ways that do not significantly increase costs.

• Offer free training, extended warranties, or enhanced customer support.
• Provide loyalty rewards or exclusive first access to new products.

Improve Operational Efficiency

Cutting waste and optimizing internal processes can free up resources to absorb cost increases without passing them all to customers.

• Automate repetitive tasks with technology (e.g., like we do with Plooto for payments, ApprovalMax for approvals).
• Streamline supply chain and inventory management.
• Reduce overhead costs by outsourcing non-core functions.

Implement Dynamic Pricing

Big retailers and airlines use dynamic pricing to adjust rates based on demand and market conditions. Family-owned businesses can take a similar approach by adjusting prices for peak seasons or high-demand products.

• Example: A flower grower might increase prices before Valentine’s Day but offer discounts post-holiday.
• Action step: Monitor demand patterns and consider flexible pricing models.

Educate Customers on Pricing Changes

Transparency builds trust. If you need to raise prices, explain why. Customers are more understanding when they know the reason behind increases—especially if you highlight the continued value you provide.

• Use newsletters, social media, or personal conversations to communicate pricing changes effectively.
• Reinforce the benefits of your product/service—superior quality, reliability, or unique expertise.

In Closing

Inflation, tariffs, and rising costs are a challenge, but they do not have to derail your business. By strategically adjusting prices, optimizing efficiency, and focusing on value, you can protect your margins and maintain customer loyalty.

Thank you for reading…