Momentum Podcast: 373
The Fastest Way To Grow Your Company
by Alex Charfen
This week I spent some time with the business owner who had asked me for some help with product delivery, like how to deliver more, how to create more products in a product line, and really wanted help with expanding his product line and even maybe doing some things that we do.
We sat down and we figured out that for him to do that could be the most disastrous thing his company could encounter. I'll share with you exactly how we figured that out quickly in just a sec.
Every entrepreneur has a tendency to go towards what we want to do rather than what we should be doing for the business. One of the things I have done repeatedly in my 25 years as a business consultant, is take really complicated systems and figure out the simple ways to analyze a business to get immediate clarity on what needs to be done next.
This led me to create “The Five Core Functions”. This is the five things a business will always have to do in order to grow and continue growing. Learn the functions, determine where you need to focus your energy first, and you will see your business grow faster than you ever thought it could.
Full Audio Transcript
Alex Charfen: This week I spent some time with the business owner who had asked me for some help with product delivery, like how to deliver more, how to create more products in a product line, and really wanted help with expanding his product line and even maybe doing some things that we do. We sat down and we figured out that for him to do that could be the most disastrous thing his company could encounter. I'll share with you exactly how we figured that out quickly in just a sec.
I'm Alex Charfen and this is the Momentum Podcast made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to, we challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will.
We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop, and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future. Instead of just daydreaming of what it could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly, the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution, and we always will be.
I've been a consultant for fast growth entrepreneurs for coming up on 25 years. Actually, it's 25 years now because I started when I was 21, I'm 46 now, so I've hit that number, it just happened on November 12th. In my career as a consultant, one of the things that I try and have tried to do, and have done over and over again is take really complicated systems and complicated processes in business and figure out what are the simple ways to identify, to look at, to examine, to analyze a business and get immediate clarity on what needs to be done next.
One of those things that I've created is what I call the five core functions of the business. The five things that a business will always have to do and will always have to involve in order to grow and continue growing as a business. They are lead generation, so the acquiring of permission to market to someone. Here is what lead generation is, it's getting someone to raise their hand, to give you their email, to get on a chat bot, to run your chat list, to get anywhere that you can talk to them and they give you permission to communicate with them.
Nurture is the communication you do with that lead. Conversion is actually getting that lead to buy. Delivery is delivering the product, the service, whatever it is, and then there's retention, resell and upsell. Those are the five core functions: lead generation, nurture, conversion, delivery, retention, resell and upsell.
Here's where you as a CEO should always be focused on understanding what's going on in your business: lead gen, nurture, conversion, delivery, retention, resell and upsell. Those five core functions will keep your business moving forward because here's what you should be doing. This is how we coach our clients. I'll give you exactly how I solve the issue with the client I talked to this week, because here's what almost happened.
We talked for a while because he came to me and said, "I have a delivery issue. I need help with the product. I need help with understanding, um, how to coach at, you know, how to add coaching programs, how to add new products in my product line." What we found out by talking was that there's a reason that his business hasn't grown as fast as it should, is that when it comes to lead generation, he's had about a two out of five maybe.
But when it comes to nurture, he's at a three or four out of five. When it comes to conversion, he's at a five, a solid five. When it comes to the delivery, he's at a five. When it comes to retention, he's at a really high number on retention, but he doesn't have resell or upsell so he was looking at how did he do that.
Here's the problem. The way the five core functions works, you read them from left to right, and if you are less than three out of five on any of these, that is where you must focus and correct until it gets better, or you're going to break the entire thing. Here's what happens when you don't have enough leads coming in, and you build out your nurture system to where my client had, he was a four out of five, maybe a five out of five. Conversion was a solid four out of five, but maybe five out of five in my opinion. I mean they might have been a little hard on themselves.
Delivery is a five out of five. He gets nothing but testimonials. He has tons of loyalty with his clients. The one place that he isn't strong is retention, resell and upsell, so you can't start there. Here is the issue. If you will consistently analyze the five core functions, they will focus your efforts as a company. They will focus all five [inaudible], your time, your effort, your energy, your focus, and your cash because you're always spending money when you focus, when you put time somewhere.
If you can consistently analyze the five core functions, it will stop you from doing something like this client was going to do by building out more delivery. I want to give you a mental picture of what happens. If you think about lead gen, nurture, delivery, conversion and retention, resell and upsell going from left to right, well if you go out, if you have a one or a two in the beginning, and you go build another part of it out like delivery, retention, resell and upsell so you build out more products, you build out more systems, you're going to invest company resources in doing that.
You're going to invest your own resources in doing that when you haven't solved the lead generation problem, that if you solve that lead generation problem, you could grow the business. Here's the real issue. If you start putting time, effort, energy, focus and cash on the delivery where you start building out products and trying to sell more to the clients that you have, but not actually getting more clients because you haven't solved lead generation, you could end up diverting resources.
If your lead generation hiccups, you've built an infrastructure in delivery that could outpace the company. You could spend more in delivery, you could be putting more into delivery, and then if you have a hiccup on lead generation, if you don't fix that, you could actually put the company sideways. That's why a lot of businesses go out of business, here is why a lot of businesses fail, especially those that get over three or $400,000.
Really around somewhere between three and $400,000, things start changing in a business, and the entrepreneur has to be doing something really right. The problem with when you get over those numbers is if you're not consistently assessing lead gen, nurture, conversion, delivery, retention, resell and upsell, you might build your business in the wrong place. You might actually start putting time, effort, energy, focus, and cash into a place of the part of the business where it could be a liability.
Here's what happens. Build out delivery systems so that you don't have enough leads coming in, but you have really good nurture, and really good conversion, and really good delivery and retention, resell and upsell, here's what will happen. The clients that you have, although you don't have enough because you haven't really solved lead generation where it's automated, where it's coming in, but the clients that you have are asking you for more so you start building out delivery systems instead of just getting more leads first.
Those delivery systems could drain the entire organization, and I've seen that happen, and it happens over and over again. You're not looking at the lead gen, nurture, conversion, delivery, retention, resell and upsell, you can end up spending time in your business on the wrong thing. If you read these from left to right, if you start working on anything to the right when you haven't solved the one before it or the one before that or the one before that, you are creating a massive liability.
There's a reason why lead gen is first, that starts the game. There's also a reason why so many entrepreneurs don't want to focus there, it's also one of the hardest things to the long-term, for the long-term growth of the business, but it's one of the last places that entrepreneurs want to focus. In order for lead gen to be more than a three, you have to be getting leads like you know where there's a dial that you can turn up and down and get leads. You might not be getting exactly your target lead and you might not be getting them at the best price, that's how you get to a four or five, but there is a dial you can turn to get more leads. If you don't have that, then you have a huge liability in your business.
Nurture has a similar scale. When we coach our clients, we have them analyze the five core functions every 90 days in depth, and then every 30 days when they're in their goal setting needs to see if they're making improvements, because this is where you should focus. What will happen is if you're a business owner for a while, sooner or later, a consultant or an accountant or someone's going to come in and say, "Hey, you know, I think you don't have a COO, and in this quarter I think it's really time for you to put this COO."
If there isn't a way that you're solving something in lead gen, nurture, conversion, delivery, retention, resell and upsell, that is the next thing your company needs, and somebody diverts your focus like that and you don't make sure that it happens, it's going to be like a gut punch. Here is what will happen. You're going to focus your team in the wrong place. You're going to put time, effort, energy, and focus there. You're going to tell them it's going to help. You're going to spend money there. You're going to create a new reality for your company in your head of how good it's going to be to have this new thing in the business.
My client had already done all of that. He was already excited about it. Like he'd already sold himself on this. He wanted to go right away like this was what he was going to do, he was going to just deliver more, but still didn't have a dial he could turn for leads like some systems to get them but not great. He had already switched.
Here is what happens to us as entrepreneurs. We'll focus on what sounds fun. We'll focus on what our natural tendencies are, we'll focus on what we want to do instead of focusing on what the company really needs especially if it's one of these five things that we don't like, lead gen, nurture, conversion, delivery, retention, resell and upsell. The one place like for me, I can't stand being is in conversion, so I will ignore it, I won't look at it. Conversion is the act of taking the sale.
In my businesses, it's really hard for me because I'm a natural salesperson. I have never used sales systems. I started selling with my dad when I was a kid, I was eight years old. I worked at the swap meet, and I figured out like if you did certain things people would buy, and I can't even really tell you what it is. Every business that I ever had, I did sales but I never followed a system, or a structure or anybody else's way of doing it. I just learned by trial and error and figured it out. I've sold billions of dollars in product, like hundreds of millions on TV alone.
Still, it's so hard for me to focus on conversion in my business because I either have to do it myself, or I have to take what I do naturally and make it into a system. It's so hard for me to figure out what I'm doing and make it into a system, and I've seen some people who can do that like crazy. Now, when it comes to how I run my business, making it into a system is what I do, that's what we sell, that's what we coach on.
When it comes to making a system to sell our product, it's one of the hardest things I do. I'm actually working on it in our current coaching model right now, but we're at 2 million. If I don't leverage sales, if I don't get salespeople in place, if I don't put multiple salespeople to support our business with a proven system that I know the conversion percentages of, and I just hand it off to somebody else to do all that for me. Unless you can't sell like you should be the person is, if you've been selling your product to get your business going, then you have to turn that into a system. I'm actually doing it right now. All of us go through this.
Look at your business right now. Give yourself a ranking on lead gen, nurture, conversion, delivery, retention, resell and upsell, and figure out where you should be focused in. Start to the lowest number to the left, or start to lower number to the left. If you have a lower number to the left and you have higher numbers to the right, stop, focus there and you're going to see your entire business grow faster than you might have ever thought it could.
Focusing here will stop you from going into your natural tendencies, or to what sounds fun, or to what sounds cool, or to what sounds like something you want to do instead of what the business should be doing next. Every single one of us has a tendency to go towards what we want to do, not what we should be doing. I'll put myself right there with every other entrepreneur I've ever coached that we all have a place where we want to focus, and that's where we will focus instead of where the business really needs.
Here is something that's important about this, is if you haven't been running business for awhile, you don't have perspective to understand that you don't notice you're doing this until usually it's far too late. But once you have built out the wrong side of a business, you might not know exactly why you did it, but you start getting some sensitivities to it. Here's the way you avoid it, go do the five core functions and then compare it to what you were thinking was in the business. Just do a read and then go with your team and ask them about the five core functions, lead gen, nurture, conversion, delivery, retention, resell and upsell.
Oftentimes, you will find the next place you are going to focus is not where you would have, or not where the five core functions indicate you should. What this does, this consistent analysis of your business in the same way with the same five sections of the business will keep you consistently growing and consistently focused on exactly the right place to create the fastest growth.