The 2 Percent Growth Model

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Key-951785I recently heard an interview with a CEO of a company that is listed in Entrepreneur Magazine’s fastest-growing companies.  He was asked what planning process he used to grow his business.  He answered that from the beginning his goal was to grow by 2 percent each month.  He explains that this led to slow, controlled growth his management team could handle.

My experience supports this approach.  I have seen many companies experience a 100 percent increase in sales that produced less profit.  Some of them even ended up going out of business.  When a company has such a large increase in sales, it often doesn’t have the employees and infrastructure to handle it.  Customer service suffers and can lead to fewer referrals and even loss of the business.

Plus, it is hard to find one thing that doubles your business consistently.  I often can work with clients and implement new marketing programs that increase the number of new prospects, improve sales closing rates, and create additional sales from their current customers.  But this is usually a one-time fix.

But every company can figure out how to improve sales by 2 percent per month.  Make 2 percent more sales calls to prospects.  Make improvements that increase your sales conversion rate by 2 percent.  Increase your online advertising budget by 2 percent.  Mail 2 percent more direct mail pieces.  Increase add-on sales by 2 percent more per customer.  The list goes on and on, but you get the idea.  Small changes are much easier to make than large changes, and are much more likely to be sustained over time.

The good news is that compounding means that a 2 percent monthly growth results in a greater increase than you would expect.  A 2 percent growth for two years (24 months) does not result in a 48 percent increase (24 * 2 percent = 48 percent) but rather a 161 percent increase.  In fact, that 2 percent increase in sales and profits will cause your company to double in size every three years.

What can you do 2 percent better this month?