Early in 2014, I was given access to Pete Williams, an Australian Entrepeneur, described by the Australian Press as the ‘Australian Richard Branson’.
At the age of 21, he saw an opportunity and became a millionaire by ‘selling’ the Melbourne Cricket Ground. It was being redeveloped and he sold memorabilia from the ground that had been touched by legends of the game such as Don Bradman, Lille, Thompson and our very own Sir Ian Botham.. He did this with very little outlay and some shrewd marketing skills, through press releases. Since then he has gone onto own one of the biggest telephone communications businesses in Australia and is very much a modern day Entrepeneur.
He gave up an hour of his time, on his day off to talk to me about a framework that he uses in his business and can be transferred to ANY business, called the “7-levers”. Since the podcast was broadcast originally in 2014, several business owners I know have started using this very framework, with some remarkable results.
Here is part of the conversation...'What will you work on this week?'
Marc : “For people who don’t listen to your podcast, which is called the ‘Preneur Podcast, you talk about ‘The 7 Levers’.
Just run us through what you consider the ’7 levers’ to your business and how you can improve your profitability and basically put more money in your back pocket.”
Pete: “I think to your point about someone going through driver training and becoming a qualified driving instructor, yes, it’s such a sad thing, that it’s not just something for that industry, it happens in so many industries. You do your apprenticeship as a carpenter or a builder or as a plumber and then, you know, you’re really good at the tools and then suddenly you decide to go and start a business and you have no business skills, because at the end of the day the doing of the work, the instructing of the driving, so to speak, is the mechanics really, of the business.
Fundamentally, as soon as you pass the test you can teach someone how to drive a car, and clutch and break and turn at the right times. But to run a business, that’s got nothing to do with knowing when to indicate. Knowing how to market, how to get leads, how to get prospects, how to convince that customer to use you again and again and again until they get their licence, that’s what makes a business, not necessarily being the best driving instructor.
It’s quite sad but that’s part of business and economics that being the best in the tools has very little relevance to being the most paid and most profitable in that industry.
So to that extent this is something that I’ve tried to use in pretty much every business I’ve ever run. It’s a framework, which is ‘The 7 Levers of Business’, because when you break it down, I’ve over time discovered, learnt, stumbled into – whatever term you want to use – that there’s really only seven things that drive the profits in a business.
So if you are trying to work on your business and grow a business the only things that really matter are these seven things, and we’ve got a detailed report about it at 'preneur.com. So if anyone’s interested in diving a bit deeper than what we can probably cover, that’s where I’d go to check it out.
They are TRAFFIC, so this is – not traffic – there are going to be a lot of bad puns I think in this conversation because it’s nothing to do with traffic as in ‘cars on the road’ and ‘trucks on the road’. But this is just the people who become aware of what you do, whether they are visitors to your web site in that sort of form of traffic, whether you maybe have a retail store.
It’s about foot traffic that walk into your store, or people who call up to enquire about your services; that’s technically a form of traffic by my definition. So the amount of traffic you get is one important thing.
From there it goes to Opt-ins. How many people put their hand up and opt in for more information about your service? So maybe it’s people who go to your web site and then request a quote, or request to find out more information. Or people who not just walk into your store, but sit down and have a chat with one of your sales team about the driving instruction courses and programmes that you offer. What is that next step they take to get to being a customer?”
Marc: “It’s about getting people’s details and getting that opt-in to just have that conversation with that individual, whether it be a phone call or whether it be an email. One of the tips that we’ve got is to create a report, ‘The Ten Reasons Why People Fail their Driving Test’, or ‘Ten Ways to increase Your Profit’, just so you can get those details, and so you can have that initial conversation with people about your products, about what you offer and why you’re different to other people.”
Pete: "Absolutely, and I think I kind of differ slightly, just slightly. I don’t want to confuse the message and your readers but I think absolutely offering something like a free report is important, you know, in a lot of different industries and niches.
But in the telco, which is the business where we sell and install phone systems, which is the bread and butter business out of everything we have - it’s the multi-million dollar business that up and down the east coast of Australia we do phone system installations - we don’t have an opt-in report for that. We have a ‘request a quote’, because we know that the next step people need to take is not an education step, it’s a quotation step. So it’s not about educating our buyers, it’s about helping them get one of the three quotes their boss has inevitably told them to get.
So you kind of need to match the type of opt-in, and this is the problem with opt-ins, is I think that’s a traditional term for this but obviously the web has bastardised it a little bit. So it’s about turning that lead into a prospect. In your industry you might need to educate your clients a little bit more, but you might not. It’s just about getting that person to put their hand up and show you they’re more qualified or more interested than just a regular ‘tyre-kicker’; there’s another really bad pun.
So once you go from traffic to opt-ins, the next thing is CONVERSION. So it’s about how many people who have put their hand up and said, “Look, I’m interested. I’m 16, I’m 17 years old”, or, “My daughter’s that age and we need to get some driving lessons so they can go and drive a car soon”. Or, “I might be looking to lower my insurance premiums and I need to get some more advanced training courses to lower my insurance premium”.
So it’s about, okay, how many people are actually going to convert and become clients?
Then from there it’s ITEMS PER SALE, so how many things can you sell that person at the point of sale? Now, a really basic example is someone walks into a footwear store for example, and not only do they buy a pair of shoes, they buy a pair of socks, an insole, some shoe cleaner and a replacement pair of laces, for example. Those are ways to increase your items per sale. So obviously the more items you can sell somebody at point of sale the greater your profits actually become.
A fifth lever in this series is your AVERAGE SALE PRICE- so obviously what are you actually selling your services for and how do we increase that?
The sixth lever is TRANSACTIONS PER CUSTOMER - how many times this person comes back and buys from you again and again and again. So whether it is someone who books one training session with you and you can then on-sell them to three or four additional sessions before they go for their driver’s test. Or maybe you can then sell them to come back twelve months later and do an advanced training course or an intermediate training course, or whatever it might be, a confidence course.
The seventh lever is obviously your PROFIT MARGIN, -what overheads, what direct costs do you have and how can you lower them? “
The 7 Levers:
Items per sale
Average sale price
Transactions per customer
Pete: “The crazy thing, or the two crazy things really with this framework, is that you can use this as a filter and focus for your time when you are notworking in your business, and when you’re actually out working on growing the business, because anything that doesn’t fall into one of these seven things is completely irrelevant because it’s not helping grow the profit of your business.
So what you can say to yourself is, “Okay, this week I’m going to focus on increasing the traffic to my business”, whether it’s getting a quote for an A-frame they can see outside the front of my retail outlet, or sign writing the car better, with a better strapline to actually get people to call. Or working on traffic for your web site, doing a Google Local campaign or an AdWords campaign, or whatever it might be to get more awareness for your business.
Then the next week you say, “Okay, I’ve worked on that lever. I’m going to work on the next lever which is opt-ins”. So how do you work on your web site to encourage more people to raise their hand and request some information, request a trial, request a consultation, whatever it is that happens in your particular business to get a prospect to put their hand up and say, “Look, I want to actually potentially work with you to learn how to drive” or whatever the skillset might be. Then obviously you work on that for a week.
Then the following week you go, “Okay, I’m going to work on conversions. How do I, either myself or my sales team, converse with these people to encourage them to use me? What are some of the sales techniques and conversations and scripts and templates I can use to make sure I convert more people to become actual clients? How do I potentially package up my solutions so it’s more appealing?” Or whatever it is you can do to increase those conversions.
What you do is you basically just focus: ONE WEEK, ONE LEVER, ONE WEEK, ONE LEVER, and that’s all you try and do, because the magic in the second part of this is if you only increase each lever by 10% - so right now you might get a thousand people to your web site a week - if you can do an AdWords campaign or a Google Local campaign, or a letterbox drop, or convince the local school to let you advertise in their newsletter, whatever it might be to increase awareness – if you can grow that from 1000 to 1100, that’s a 10% increase.
Then maybe for example your web site currently has a conversion rate of, let’s say it’s 15%. So 15% of all the people who come to your web site say yes and request a quote or download your report, or whatever it might be you do to generate opt-ins and get people to put their hand up. If you can increase that by 10%, which is 15% to 16.5% - it’s not a 15-25% increase, it’s a 10% increase on itself. So it’s only going from a 15% conversion rate to a 16.5% conversion rate.
There are lots of ways you can do that obviously by just split testing the headline or putting a testimonial on the pages, lots of little easy things you can do to get that 10% increase. So if you literally week one do an AdWords campaign and increase your traffic by 10%.
Week two you work on a way to actually increase that conversion rate by 10%, going from 15-16.5%, the next week you work on your conversions. So every week all you’re trying to do is just a 10% increase which I think for most people is not a scary goal to work… It’s not tripling your product, it’s not tripling your traffic, it’s not raising your prices by 100%. It’s just a 10% increase, that’s all it is; very, very simple and achievable I think for most people.
What actually happens is at the end of that cycle, at the end of those seven weeks or seven days, or however you want to work through those seven steps as a framework, what happens mathematically - and it’s indisputable because it’s maths - is the gross profit of your business doubles. You double the profit of your business in seven weeks.”
(Anybody else see how simple this is? – Marc)
Pete: “It’s incredible because it’s just like that’s what compounding does. You increase your traffic, and then if you increase your opt-ins you’re getting more traffic opting in more. You’re getting obviously more people who can convert. Then you increase your conversions; that increases the amount of customers you have obviously, exponentially.
Then if you convince every tenth person to buy an additional item, whatever it might be, that can increase your profits again, your revenue again. Obviously as you go through increasing everything by just 10% the cumulative effect at the end of the day is double the profits. It is insane.”
Marc: “Is this sort of how –and please be honest – is this how you look at your own business? Is this how you’ve done it for many years or is this something that over the last two or three years has really just come to you and you’ve realised the magic yourself?”
Pete: “It’s probably since the podcast has been going and obviously this is the underlying framework of what we talk about in the podcast and write about in the blog and all that sort of stuff. It has obviously solidified itself a lot more. You know, the more you talk about something the more you make it concrete in your own mind, being able to articulate it better.
But fundamentally it has been the underlying framework for everything we do, and obviously as your business grows it’s harder to continue to double the profits every seven weeks, let’s be transparent about it. It’s kind of impossible. After eight or nine years of having a telecommunications company there are only so many margins we can squeeze out from our suppliers. We can’t reduce our margins by 10% every seven weeks; that’s just not possible.
So obviously at certain times certain levers become harder to pull because you’ve really maxed them out. Sometimes you might do something that doubles your conversion rate. Maybe one week what you’re doing is you test a different opt-in page or a different offer, or you put some testimonials, or you put some credibility factors, with logos of third party companies. Or media publications that have spoken about your driving school and your impeccable record, and how you help. You put that on your opt-in page and that increases your conversions by 25% one week by one simple thing like that.
So you can have big wins some weeks and small wins the other weeks, but overall it is just that framework and that guidance to keep you focused over and over again. If you keep working on it you absolutely will continue to use this framework and double your business on a regular basis, on a very cyclical scenario.”
Marc: “Seven weeks- People often talk about habits and it’s a habit former. I think once you’ve gone through the cycle two, three times - you’re talking 21 weeks so you’re talking really just under half a year - that’s a real habit.
It’s going to be embedded to the point of you’re not going to be really thinking about doing what you’re doing because the more you do it the faster you’re going to get at it, the more – how can I put it – creative you’ll be with some of the levers as well.”
Certainly with the opt-ins and trying different things on your web site. I’m a big one - I’ve just become a massive fan of MailChimp, I think I was slow to the party as usual; I was turning up fashionably late. But I’ve become a massive fan of MailChimp and I’ve noticed a couple of things when we were marketing for our conference earlier on in the year that I tried the A and B split. The content of the email was identical, it was just the title that changed, and it was amazing just the different response just to a title change.
It was only a couple of words, and one was slightly tongue-in-cheek and the other one was a bit dead serious. The dead serious one got ignored. But the tongue-in-cheek one certainly got picked up.”
Pete: “That’s the thing here is what you do is, okay, this week – and you can do it monthly, you can say, “Look, I’m flat out or I’m busy right now doing the mechanics of the business” – which I kind of mentioned earlier – “I don’t have time to spend working on one lever a week”. Well you do one lever every month.
So if realistically you said to yourself that you could double the profits of your business in seven months, for most businesses who haven’t got some weird dream of sales that it’s going to make them a millionaire in sixth months and you actually are realistic about your goals and your business, doubling the profit in seven months for most business owners is still a pretty amazing result.
So if you just said to yourself, “Look, I’m going to spend a month on each lever” or, “I’m going to spend a week on every lever and keep going through the cycle but I might only get 3% increase each time”, it’s going to take a few cycles to get the 10% target you need per lever for it to mathematically double the profit. That’s fine, it’s not about necessarily doubling the profit of your business in seven weeks.
That’s a great by-product but realistically it’s the framework of focus that you get to say, “Okay, this week I’m going to sit down and work on my business. I’m going to get out of that passenger seat, out from behind the wheel. I’m going to sit down and work on the business. What am I going to do this week?” I think most people just run around confused because they don’t have business training like you suggested before, Marc. This framework can give you that structure as well, which is really important. “
Marc: “Let’s recap the 7 Levers. They are...
The 7 Levers: Traffic, Opt-ins, Conversions, Items per sale, Average sale price, Transactions per customer, Profit margin.
Conclusions...Take some time to re-read this post and you’ll realise this system is very simple. Early message from business owners that have decided to give it ‘a go’, have had found very surprising results by concentrating on these levers week by week. In many cases, by concentrating on a certain aspect of their business for the first time in isolation, they have exceeded the 10% driver in each area easily. Whilst it will become more difficult to maintain that, the 10% target is a simple one and not too challenging psychologically.
For more details about this framework and how to make it work, along with Pete’s own Podcast called, The ‘Preneur Cast, visit http://preneurmarketing.com