What are the Five Levers of running a business?
The Five Levers are a tool to help business owners and leaders focus on the five major aspects of a business that can be managed and controlled. Resources — time, money, or people — are limited, so it’s important to consciously think about how you invest in those resources. The familiar saying, “just because you can, doesn’t mean you should” absolutely applies to running a business. These Five Levers are the fundamental drivers of bottom-line revenue for nearly every business:
Each lever should have a target metric. What, when, and how you measure aren’t as important as keeping an eye on the trends for each metric. The goal is to grow each number and watch it impact the bottom line. A small uptick in each lever can have a huge impact.
The Levers are there to help make decisions about resource investment. When faced with a decision, it’s important to understand the potential result of that decision. If you only have $500 to spend, how could you spend that in a way that would impact one or more of the five levers? If the investment doesn’t impact a lever, it doesn’t mean you shouldn’t do it. But the decision to do it should be done thoughtfully, with a clear understanding of the value of the investment.
What are some considerations when looking to scale your business and reach the next revenue bracket?
Not every business can or should grow the same way. Choosing a growth strategy starts with understanding the core of the business: the vision, mission, values, the brand and its competitive strategies.
For example, a discount retailer known for low prices and executing a cost leadership competitive strategy would grow by looking at economies of scale, efficient production, and agility. A specialty or boutique retailer known for higher prices and executing a differentiation strategy would grow by skillful marketing and quality management.
There are many growth strategy options, each requiring different levels of investment and control and return — strategic alliances, join ventures, mergers/acquisitions, franchising, and licensing, for example.
No matter the strategy, the fundamentals are the same. Set objectives and work toward them. Having key objectives or goals and measuring progress helps focus efforts. It keeps the bigger picture and end goal in mind for yourself and team.
What challenges of independent retailers have you’ve observed as they look to grow their business?
Like most entrepreneurs, some independent retailers started their business because they had a passion for the product, services, industry, or market. That passion can help drive someone to work through obstacles, and their customers can feel that energy. That’s great and it helps, but unfortunately, it’s not enough. Especially when times get tough.
It takes some basic business skills to run and grow a business, not just to survive, but to thrive. Passion alone is not enough. Independent retailers have to handle every part of the business: marketing, sales, customer service, supply chain/inventory management, accounting, human resources, and even payroll! Successful retailers know their strengths and weaknesses and surround themselves with people who can fill in the gaps in their knowledge. It’s exceptionally difficult to manage every part of the business well by yourself, and even harder to grow it if you’re flying solo.
Do the things that you’re good at and that interest you while providing what the shop needs. If you’re not good at something, but it interests you and could be useful, learn about it. For all the rest, get help.
In what ways has COVID-19 impacted the way in which independent retailers expand their existing customer base?
Looking back, I think the independent retailers that survive COVID-19 will be the ones that can adapt quickly to change their business as the consumer landscape changes.
I’ve seen agile businesses maneuver to sell products that are in demand. For example, retailers who may not have been known as a “sewing shop” started to offer mask-making fabric, notions, kits and training, and even finished masks.
Retailers accelerated their online presence. Many are now marketing online to reach a much larger prospect pool. They are selling online to all the “hunker-downers.” Traditional brick and mortar retailers are accepting orders over the phone and offering curbside pickup or delivery options.
Social media has made it even easier for retailers to let consumers know they can safely shop while maintaining social distancing, including the use of contactless payments.
Now, perhaps more than ever, the way to expand your customer base is through online marketing. Let’s face it, people just aren’t driving around as much as they used to! And everyone is spending time online.
What are the fundamentals of attracting new customers and maintaining relationships with existing customers?
The fundamentals of attracting new customers are the same now as they were “pre-COVID-19.” The tools or the “map” are likely different, but the strategies are the same. John Jantsch nailed it with the first five of the seven phases of the Marketing Hourglassssm in his book, “Duct Tape Marketing.” You have to get people to KNOW about what you offer, LIKE you, TRUST you, TRY you out, and BUY from you.
Think about tools like social media ads/posts, blog posts, search engine ads, coupons, deals, and testimonials. Evaluate how easy you are to do business with. What’s your return/exchange policy? How hard is it to checkout (in person or online) once I decide to buy?
Maintaining a relationship with existing customers is all about making them feel special while keeping your brand top of mind. Of course, delivering on your brand promise with quality products and services and exceptional customer service goes without saying!
Click here to access the replay for Joe Rotella's webinar "Pulling the First Lever - Lead Generation and Getting In the Door".