There’s no secret to scaling a 7-figure online business.
No hack or shortcut to success.
Sure, there are specific actions that increase your chance of success more than others. We’re going to explore some of those in more detail shortly. But let’s not pretend that it’s easy.
It takes hard work, consistency, and grit to get there.
But ‘Leverage Points’ can help you do it faster.
Those are what we help our clients to measure and improve at Clear Accounting. And I’m going to share all 6 of them with you shortly.
I’ve also created a short 2-minute assessment to identify the leverage points in your online business and how to improve them.
But first, what do I mean by leverage points?
Business growth is no accident. It’s the culmination of lots of individual parts working together to create results. Hidden among these individual parts are leverage points – numbers which when increased (or decreased) can have a multiplier effect on your revenue growth.
And in most online businesses there are 6 of them that you need to know.
When you know what these leverage points are, business growth goes from:
- Random activities that barely move the needle, to
- Strategic focus areas that drive substantial revenue growth
I said upfront there is no shortcut to success. There isn’t. But knowing what these leverage points are and how to increase them will dramatically increase your chances of reaching 7-figures ten-fold.
Ready to unlock the cheat code for your business growth?
Here we go…
6 ‘hidden’ leverage points that will multiply your growth
These leverage points are hidden in plain sight.
Some of them you likely already know. You just don’t understand the leverage they can have on your business growth.
The 6 leverage points that will multiply growth in your online business are:
- Lead conversion rate
- Email open & click-through rates
- Lead to customer conversion rate
- Cost of Customer Acquisition (CAC)
- Customer Lifetime Value (CLV)
- Net-profit margin
Let’s do a deeper dive into each to understand the role they play…
1. Lead conversion rate
What is it?
Lead conversion rate refers to the number of leads that take action on your website. This could be opting in for your newsletter, or even better, downloading a lead magnet.
How do you calculate it?
Take the total number of people that visit your website, and divide it by the number that took action (i.e. joined your email list or downloaded your lead magnet). This is your lead opt-in rate.
For example, if 100 people visit your lead magnet landing page, and 40 download it, your lead opt-in rate would be 40%.
What impact does it have on revenue growth?
Let’s look at 2 examples:
Example 1 – 10% lead conversion rate:
- 1000 web visitors
- 10% lead conversion rate
- 100 leads
- 10% purchase your $99 product
- 10 customers @ $99 each
- $990 revenue
Example 2 – 40% lead conversion rate:
- 1000 web visitors
- 40% lead conversion rate
- 400 leads
- 10% purchase your $99 product
- 40 customers @ $99 each
- $3960 revenue
Big difference, right??
2. Email open & click-through rates
What is it?
Email open & click-through rates measure how engaged your audience is on your email list. An engaged audience is more likely to buy from you.
How do you calculate it?
An email open rate is the percentage of people who opened your email of those who received it. It’s calculated by dividing the number of email messages opened by the total number of email messages sent (excluding those that bounced).
Assume you send out your email to an audience of 1000 who all receive your email. 570 people opened it.
570/1000 = 0.57 x 100 = 57% open rate
An email click-through rate is the percentage of recipients who clicked a link in your email out of those who opened it.
Assume of the 570 who opened your email, 109 clicked the link.
Your click-through rate would be:
109/570 = 0.19 x 100 = 19%
What impact does it have on revenue growth?
Let’s look at 2 examples:
Example 1 – Open rates 20% and CTR is 10%
- 1000 people receive your email
- 20% open rate = 200 people open it
- 10% CTR = 20 people clicking on your call to action (e.g. buy your product)
Example 2 – Open rates 40% and CTR is 20%
- 1000 people receive your email
- 40% open rate = 400 people open it
- 20% CTR = 80 people clicking on your call to action (e.g. buy your product)
In those examples, you’ve managed to get up to 4x as many potential sales from the same group of email subscribers just by increasing your open and click-through rates.
I’ve written a more detailed breakdown with 7 ways to improve email open and click-through rates.
Discover the specific leverage points that will unlock growth in your business in less than 3 minutes. Start the diagnostic.
3. Lead to customer conversion rate
What is it?
Lead-to-customer conversion rate refers to the number of leads that go on to become paying customers. There’s no point in generating leads that won’t buy from you. So knowing and tracking this number means that you’re converting potential leads into paying customers efficiently.
For low-priced products (<$99) aim for 10%.
For higher-value products ($250+) a 1-3% lead-to-customer conversion rate is excellent.
How do you calculate it?
Take the total number of leads in your email list and divide it by the number of paid customers that came from it. That’s your lead to customer conversion rate.
For example, if you have 100 leads and 10 become paid customers, then your lead-to-customer conversion rate will be 10% (10/100).
What impact does it have on revenue growth?
Let’s look at 2 examples…
Example 1 – 5% lead to customer conversion rate
- 1000 leads
- 5% conversion rate
- 50 customers @ $99 each
- $4950 revenue
Example 2 – 10% lead to customer conversion rate
- 1000 leads
- 10% conversion rate
- 100 customers @ $99 each
- $9900 revenue
Now imagine if the price point was higher. Even a small % increase can make a huge difference.
I’ve written a more detailed breakdown with 4 proven conversion rate tweaks here.
4. Average Purchase Value (APV) & Customer Lifetime Value (CLV)
What is it?
Average Purchase Value (APV) refers to the average amount that a customer spends with you in one transaction.
Customer Lifetime Value (CLV) refers to the average amount that 1 customer spends with you over your entire relationship with them.
How do you calculate it?
Average purchase value = Revenue / # of transactions.
For example, if your revenue for the year is $500K, and your customers bought from you in 350 transactions, then your average purchase value is $500K / 350 = $1,429.
Customer Lifetime Value = All the revenue you’ve ever generated / the number of paying customers you have. This can be a tricky one to calculate unless your business is more mature – because your existing customers could always buy more, pushing the number up.
What impact does it have on revenue growth?
A huge impact.
Here are 2 examples using APV:
Example 1 – APV is $99
- 500 customers
- APV = $99
- Total revenue = $49,500
Example 2 – APV is $149
- 500 customers
- APV = $149
- Total revenue = $74,500
I wrote a more detailed breakdown of how to measure and improve APV and Customer Lifetime Value here.
5. Cost of Customer Acquisition (CAC)
What is it?
In simple terms, your Cost of Customer Acquisition (CAC) is the amount you spend to acquire a new customer. It includes the costs of any marketing costs e.g. video editing, content creation, etc, and sales expenses like ad-spend or commissions.
How do you calculate it?
To calculate your CAC:
CAC = Cost of marketing / Number of customers acquired
For example, you spend $3K on ads and an additional $4K in sales commissions which makes $7K total. If you get 50 customers from that, your CAC is $7000 / 50 = $140.
What impact does it have on revenue growth?
On its own, CAC won’t have an impact on growth. But combining it with your APV or CLV can have a huge impact…
If your current CAC is $100, and your APV is $300 – what that tells you is that you can afford to spend more to acquire customers. Doing so will mean you out-compete anybody else targeting the same customers. I wrote a more detailed breakdown of why the business that can spend the most to acquire a customer—wins.
6. Net Profit Margin %
What is it?
Net profit margin measures how much sales revenue you keep after all of your expenses are covered. It’s an indication of how efficiently your business is running. Most online businesses can easily hit 20%. Many can hit 30-40% o higher.
How do you calculate it?
The easiest way to calculate net profit margin is:
( Total income – total expenses ) / Total income
For example, if your total income is $500K and your total expenses are $350K, then your net profit margin will be: (500 – 350) = 150 / 500 = 0.3 * 100 = 30%
What impact does it have on revenue growth?
None. It measures the amount of money you actually make.
Understanding the leverage points in your online business
Now you know the cheat code to unlock 7-figure growth in your business.
By focusing on incremental improvements to each of the 6 leverage points mentioned above, you can multiply your revenue from 6 to 7 figures with strategic focus vs. random acts of hope.
If you want to understand more about the hidden leverage points in your business, I created this short assessment to help. In less than 2 minutes you’ll understand how your business is performing and the specific actions you need to take to accelerate toward 7-figure growth.
Complete the assessment in less than 2 minutes here.
Until next time,
Dan Steinhart, CPA