Dan Martell - The 3 Cycles of Business Growth

00:00:00.000 I do know a very inappropriate joke

00:00:02.540 that takes a little bit of time to tell

00:00:04.440 but always gets me an incredible laugh.

00:00:13.860 The three cycles of business growth.

00:00:15.840 If you feel like you're building a business,

00:00:18.700 you're growing really quick,

00:00:19.980 but you're not making any money,

00:00:21.700 or you don't have a good handle on

00:00:23.860 what part of my business do I need to be focused on

00:00:27.120 today, next week, next month,

00:00:29.240 or you feel like, hey, I've been building this company

00:00:32.820 for a while but I don't even know if I'm a good operator,

00:00:35.020 a good entrepreneur, a good executive,

00:00:37.440 then this video's for you because I just want to share

00:00:39.120 with you guys the opportunity of understanding

00:00:41.920 what part of the cycle you're in so that you can understand

00:00:45.180 what do you need to do next, right?

00:00:46.520 Because I really believe that understanding

00:00:48.960 these three cycles will give you the clarity that you need

00:00:51.760 to not feel like things are going crazy.

00:00:53.840 I mean, to know, the number one thing I do for my clients

00:00:56.940 when I coach them is making sure that they understand

00:00:58.900 that it's normal.

00:01:00.040 I think that most entrepreneurs are so freaking hard

00:01:02.600 on themselves, right?

00:01:03.880 They're going through the turbulence.

00:01:05.240 They're going through the growth.

00:01:06.240 They're going through the downsizing and the language

00:01:09.480 and conversation and frustration and lack of sleep

00:01:12.040 and all these things that they do themselves

00:01:14.140 is just not fair.

00:01:15.080 So I want to give you context for the different cycles

00:01:17.720 that I believe exist in all businesses,

00:01:19.420 especially ones that are growing really fast

00:01:21.120 and kind of know how you transition to the next one.

00:01:24.120 So for me, I really learned this lesson

00:01:27.520 watching a good friend of mine, you know, he built,

00:01:29.960 I think he was in business a little under 10 years,

00:01:31.920 built a four million plus dollar a year business.

00:01:34.500 And what I noticed is over the last 10 years is

00:01:38.240 the business grew and then he gave it back.

00:01:41.260 And he grew and he gave it back.

00:01:43.400 It's funny how many entrepreneurs,

00:01:45.640 they think they're making progress because

00:01:47.800 essentially what they do, it's like a stock.

00:01:49.740 They make a lot of progress, then they deal with challenges,

00:01:52.980 and then they're here so they want to grow again,

00:01:55.540 So they grow again, but they pattern,

00:01:58.500 they kind of hit the top,

00:01:59.540 and then they lose it all again.

00:02:01.340 To me, business is not about making money.

00:02:03.300 Making money's easy.

00:02:04.360 You know, if you know how to talk to people

00:02:05.980 and create value, making money's easy.

00:02:08.080 The hard part is not losing it.

00:02:10.140 And that is the challenge

00:02:11.380 and why you need to understand what cycle you're in

00:02:12.860 so that you can focus on the next level

00:02:14.020 so you don't go up, down, up, down.

00:02:16.280 Don't give it back.

00:02:17.620 If you're in that cycle today,

00:02:19.400 then make sure you understand these three cycles

00:02:21.380 to get to the next one.

00:02:23.000 So the first one for me is going after sales.

00:02:25.340 If you're starting in business or you're trying to go to business, you've got to get the top line revenue.

00:02:29.480 Income, and especially profits, solve all problems.

00:02:33.380 So when you're like, well, should I create these systems or should I hire more people or should I buy this new machine to improve the efficiencies?

00:02:41.700 Those are all really great options, but to me, if you need more top line revenue, you've got to focus on going for sales.

00:02:46.980 Sales, sales, sales, top line revenue.

00:02:49.400 Make sure that the income's there because great businesses work off percentages, right?

00:02:53.660 And if you have a high enough top line revenue,

00:02:56.700 enough income, and you have a decent profit margin,

00:02:59.780 then that number's actually quite impressive.

00:03:02.180 Most businesses get in trouble

00:03:03.440 because they're only doing a few thousand a month, right?

00:03:05.900 10,000 if they're lucky.

00:03:07.400 You wanna be doing a lot more

00:03:09.300 so that when you look at the percentage of profit,

00:03:12.060 you'll be able to expand it

00:03:13.660 and improve the economics of the business.

00:03:15.920 So number one is going after sales

00:03:18.000 and really focusing on the top line revenue.

00:03:20.040 Number two is building the cost structure.

00:03:24.120 So most entrepreneurs are really good at selling.

00:03:26.920 You know, if you're successful,

00:03:27.880 if you've been in business now for almost 10 years,

00:03:30.380 you've probably got great top line revenue.

00:03:32.380 But what you need to get great at

00:03:34.060 is understanding the margin structure, the cost.

00:03:36.740 Where do the expenses come from?

00:03:38.340 Because again, I don't want you to give it back.

00:03:40.680 I want you to make the money, build the business,

00:03:43.680 create the profitability, and don't give it back.

00:03:46.340 And a lot of entrepreneurs give it back

00:03:47.560 in the margin structure.

00:03:48.360 They buy something for $10, they sell it for $12.

00:03:52.200 That's just crazy.

00:03:53.140 This happens all the time in the service businesses.

00:03:55.040 They're like, you know, I've got this team

00:03:58.240 and I'm billing out them at X rate

00:04:00.600 and I'm getting paid for this.

00:04:01.640 It's like, yeah, but you're not considering the fact

00:04:04.200 that you've got overhead, you've got real expenses,

00:04:07.540 you have clients that you've gotta finance their growth

00:04:09.880 because you probably have outstanding receivables,

00:04:12.120 you have people that may not pay you,

00:04:13.480 you have the potential for lawsuits.

00:04:15.760 I mean, at the end of the day,

00:04:17.060 if you don't understand your cost

00:04:18.820 to figure out your gross margin,

00:04:20.420 then that's where you go.

00:04:21.780 Top line revenue's number one.

00:04:23.620 Number two is understanding your cost controls.

00:04:26.300 Really looking at each project,

00:04:27.980 each product that you sell,

00:04:29.780 each service that you sell,

00:04:31.180 and figure out what's the profitability or the margin

00:04:33.620 so that at least you know.

00:04:34.580 Then you can go to the market and say,

00:04:35.860 hey, customer, I love you,

00:04:37.240 but I know we used to do this for this amount,

00:04:39.100 and going forward, we have to change it

00:04:40.820 just so that we can build a great business.

00:04:42.260 Because to me, the frustration is not being able

00:04:44.560 to do great work, right?

00:04:46.020 You can't do great work if you're always putting out fires,

00:04:49.200 chasing receivables, not have the profit level

00:04:51.900 to invest in the team, to do things for culture,

00:04:54.620 to really just know that you've got the ideas

00:04:57.160 and you're holding yourself back

00:04:58.300 because you can't afford to invest, all right?

00:05:01.240 So you need to get the cost control.

00:05:02.340 Once you get the top line, you get the sales going,

00:05:04.240 number two is getting the cost.

00:05:05.240 Number three is making sure that you improve

00:05:07.980 your market reach, right?

00:05:09.280 Which is essentially what I call, you know,

00:05:11.540 I have a model called the growth engine.

00:05:13.320 It's demand marketing.

00:05:14.580 It's improving your ability to have a message

00:05:17.480 inserted into the market that attracts more clients, okay?

00:05:21.020 Sales is like selling, right?

00:05:22.320 So you're just going off, picking out the phone,

00:05:23.660 referrals, et cetera.

00:05:24.620 Market reach is actually building a marketing program,

00:05:27.760 right, increasing your offering.

00:05:29.660 So maybe you started here and you do this really well

00:05:31.700 and you got to half a million revenue,

00:05:32.860 now you want to go to the next level.

00:05:34.260 You need to figure out what's the next offer

00:05:36.700 or product or service that we need to present to customers

00:05:39.640 or segment a new market to be able to grow

00:05:41.780 the overall business.

00:05:42.940 Improving your market reach is number three.

00:05:45.000 So that is how businesses go.

00:05:47.480 They expand, they contract.

00:05:49.180 They expand, they contract.

00:05:50.440 Growth is never linear, right?

00:05:52.320 I know that every time we sit there, we're like,

00:05:53.920 oh, let's build a business plan.

00:05:55.780 I'm gonna start here and I'm doing X amount of revenue

00:05:57.960 and I'm gonna end the year up high.

00:05:59.560 It's never linear.

00:06:00.820 Go look at your numbers on a monthly basis.

00:06:03.120 It's step functions of growth

00:06:05.120 because it's always expand and contract.

00:06:07.540 So what you wanna know is what cycle do you need to be in?

00:06:10.040 Do you need to improve your market reach?

00:06:11.600 Do you need to improve your cost controls

00:06:13.160 or do you need to improve your top line revenue, your sales?

00:06:16.540 And if you're there and you've done that,

00:06:18.160 then get the cost controls, get the profitability,

00:06:20.400 then improve your marketing reach, boom.

00:06:22.360 Then go after sales again.

00:06:23.600 That's the cycle.

00:06:25.240 That's the way businesses work.

00:06:26.760 It's always about trying to find opportunities

00:06:29.200 and turning those opportunities into profit.

00:06:31.240 So those are the three business cycles.

00:06:33.260 Real quick, going after sales, cost controls,

00:06:36.440 and three, expanding your market reach.

00:06:38.840 I hope this video finds you incredibly well.

00:06:41.200 And as per usual, I challenge you to live a bigger life

00:06:43.320 and a bigger business and I'll see you next Monday.

00:06:45.280 Cheers.

00:06:46.320 If you like this video, be sure to subscribe to my channel.

00:06:48.860 I'd also encourage you to join my newsletter

00:06:50.600 where I share exclusive invites to events

00:06:52.540 and other free training videos.

00:06:54.080 And if you're ready to get going,

00:06:55.100 I've got a couple more videos queued up for you.

00:06:57.280 See you next Monday.

Dan Martell - February 06, 2017

The 3 Cycles of Business Growth

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