In a large company, business development is a job title. In an owner-managed business it is a set of five numbers: how many enquiries you get, what share of them buy, what the average sale is worth, how often a customer comes back, and what you keep out of every pound after direct costs. Multiply the first four and you have revenue; apply the fifth and you have gross profit.
Owners often start by saying they need more leads. Once the five numbers are on the table, leads are often the most expensive of the five to move and rarely the one holding the business back. Put all five on one page first, with last year’s figure next to each, before you decide where to spend money or time.
What are the five numbers?
- Enquiries. How many opportunities reached you last month, and where did they come from? Count people who asked, not website visits.
- Conversion. What share of those became customers? Count it for one month rather than guessing.
- Average sale. What does a customer spend the first time? The fastest movement here comes from what you include and what you stop giving away.
- Frequency. How often do they come back in a year? It costs far less to work on than finding a new customer.
- Margin. What do you keep after the direct cost of delivering? A point of margin adds more profit than a point of revenue. Check it by type of work, because a blended figure can hide one category running well below the rest.
Why do small movements add up?
The five multiply, so a modest improvement on several of them compounds into a number that looks implausible from a standing start.
An illustration, not a client. A business takes 400 enquiries a year, converts 25% of them, and the average customer spends £900, which is £90,000 of revenue at a 40% gross margin, so £36,000 of gross profit. Improve three of the five by 10% — 440 enquiries, 27.5% conversion, £990 average sale — and revenue becomes £119,790. Lift margin from 40% to 44% as well and gross profit becomes £52,708, which is 46% more than the £36,000 you started with.
A single lever moved 10% adds 10%. Four levers moved 10% each add nearly half again, and each change is small enough to finish.
Which number should you start with?
Work top down and take the largest number you can move this quarter. In many owner-managed businesses the order is margin, then average sale, then conversion, then frequency, and leads last. Margin and average sale land in profit immediately and cost nothing to change except a conversation with customers. Conversion uses enquiries you are already paying for. Leads are last because more of them, poured into a process that loses two thirds, produces more work at the same profit. To measure margin, take revenue less the direct cost of delivering each job, and work it out by type of work rather than in total. To measure average sale, divide revenue from new customers by the number of new customers in the same period. To measure frequency, count how many times each existing customer bought in the last twelve months and take the average.
The exception is a business whose enquiries have stopped, where leads come first.
How does the 90-day sequence run?
- Weeks 1 to 2. Get the five numbers on one page, from your own records. Use the last twelve months of sales invoices for enquiries, conversion, average sale and frequency, and your management accounts for margin.
- Week 3. Pick one lever, and write down the target and the date.
- Weeks 4 to 11. Do the work and hold it through the uncomfortable middle, when a price change is still washing through the order book. Check the chosen number every fortnight, and write down what you changed and when, so you can link any movement to the action that caused it.
- Week 12. Re-measure all five, decide whether it moved, and pick the next one. That is the quarterly rhythm behind Performance on Purpose.
If you want the numbers for your own business before you start, the Profit Improvement Calculator takes the five and shows what each small movement would be worth. The Five Ways explains the model behind it, and Business Coaching is the same work done fortnightly with somebody asking what happened.
Andy Jackson is Co-Founder of Buzz and the author of Performance on Purpose: build the person, develop the leader, improve the business. He writes about the method at andyjackson.com, where the courses and books sit alongside it.
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Frequently asked questions
Is business development another name for sales?
Sales is one of the five numbers and it is the one owners reach for first. Business development is the whole set: how many enquiries arrive, what share of them buy, what each sale is worth, how often they come back, and what you keep out of every pound. A business can grow substantially without a single extra enquiry by moving the other four, and in an owner-managed business that is often the cheaper route because it uses customers and capacity you already have.
Which of the five should I start with?
Start where the arithmetic is largest and the change is quickest, which is often margin or average sale. Both land in profit immediately, neither needs marketing spend, and both are within your control this month. Conversion comes next, because it uses enquiries you are already paying to generate. Leads come last for most owner-managed businesses, since more of them into a leaky process produces more work and no extra profit. The exception is a business whose enquiry flow has dried up, where nothing else matters until that is fixed. Write the chosen number and its target date at the top of your plan.
How long does a growth push take to show in the numbers?
A pricing or margin change shows in the month it lands, then works through the order book over the following quarter. Conversion changes show within about six weeks, because you are dealing with enquiries already arriving. Anything that depends on generating new demand takes longest, typically two to three quarters before it is more than noise. Set the expectation before you start, because it is tempting to abandon a correct change at week five, when the early numbers are still mixed.
Do I need to spend more on marketing to grow?
Not until the rest of the process can handle what you already get. Work out what share of last year's enquiries turned into customers and what an enquiry is worth once it does. If conversion is under a third, spending more on generating enquiries is buying more of something you are not yet converting. Fix the response time, the quoting and the follow-up first, then spend, and spend on the channel that produced your best customers rather than the one that produced the most enquiries.