Last year I read a really great book and then wrote an article that talked about the 52 small changes that spark big influence. I've implemented many of these recommended approaches and can attest to their effectiveness. But then I got to thinking that it's not just influence, but your entire business that is impacted by the smallest things.
This all started when I met Tony Robbins' golf coach, Tim Hurja, who told me an incredible story about one of the golf lessons he gave Tony Robbins. As you can imagine, Tony Robbins enjoys being the best life coach in the world and desires to bring his A-game to everything he does. Golf was no exception. Tony was pleased to pick up the golf club and immediately start hitting some great shots down the fairway. But then, as is prone to happen in golf, the harder he concentrated and swung his club, the shots became less consistent and more frustrating.
If you've ever played golf, you can totally empathize here. When you're relaxed and not thinking too hard about it, your tension is down and you tend to play pretty well. But, as you try harder and tense up, your game actually gets worse, not better.
It's at this point that Tim Hurja introduced Tony Robbins to the concept of the 2 Millimeter Shift. "In golf your clubface must be square to the path you're swinging on to hit the ball straight, it's less than a 2 millimeter shift that makes all the difference," he said. "A two millimeter shift may not seem like much, but as you carry that small shift out further and further it has a dramatic impact on your outcome."
Business Application of the 2 Millimeter Shift
Tony Robbins immediately got it. Not only was he able to improve his golf, but he took that lesson into his world-class events helping his audience understand how the smallest change in your business can have a substantial impact. This is one of the many important lessons Tony Robbins teaches at his Business Mastery event. He illustrates it through a powerful process where he illustrates how a few 1 to 20% improvements consistently delivered can grow your business as much as 72.8%.
Now I know what you're thinking, because I thought it too. The math doesn't add up. But what I was not understanding is the compounding nature of these small improvements on each other. Let me provide an example. There are only 3 ways to improve your top-line growth: (1) Get Your Current Customers to Buy More, (2) Get Your Current Customers to Buy More Often, and (3) Get New Customers.
Let's say you improve each of these by 20%. Logic would dictate that you would grow your business by 60%, right? But no, it's actually 72.8% when you factor in the compounding effect of doing all three. Let me illustrate. Let's say that your current customer spends $100,000 per year with you and buys 10 times a year. If you were to get them to buy 20% more each time your average sale would go from $10,000 to $12,000. When multiplied by 10 times, that gets you $120,000, or a 20% increase. Now add the current customer buying more often. At 20%, that's an 12th purchase at $12,000. So now that one customer is now spending $144,000. Already, we're seeing more than a 40% increase. Let's say you're a $5 million dollar company and for simple math have 50 customers. If you could get 20% more customers (keeping the first two changes), that means you now have 60 customers buying 12 times a year at $12,000 for a total of $8,640,000. That's not 60% growth, but 72.8%.
Even Smaller Changes That Make a Bigger Impact
If we were then to switch the focus to internal operations, the numbers get bigger faster. One big mistake entrepreneurs make is thinking that all problems can be solved with more top-line sales growth. One of the most stunning examples of where that's wrong is the entire dot com era where businesses were losing money on their sales and somehow figured they could make it up on volume. The vast majority of internet companies that were going out of business were showing growing unprofitable sales at scale. With razor thin margins and a lack of clear operational controls, growth of the top-line can actually bankrupt your business (see related article, Why 96 Percent of Businesses Fail Within 10 Years).
During Keith Cunningham's session at Business Mastery, he teaches that "Profit is a theory, but cash is a fact." And using his tool, CFO Scoreboard, he show audience members in real time what happens when you make incredibly small changes such as increasing the length of time you wait to pay your vendors by a few days versus speeding up the collection of your receivables. To many business owners, operational efficiency can feel like an amorphous mess until you see your own bottom line profit numbers change dramatically with 1 to 5% changes in your operational costs and the management of payment timing.
Your accountant is NOT your CFO. Your accountant is paid to ensure you pay your taxes and don't get into trouble with the IRS. That's not the same thing as true financial planning. Unfortunately, most entrepreneurs don't fully appreciate that until it's too late.
For more on this topic, I encourage you to check out Tony Robbin's Business Mastery Million Dollar Guarantee.