10X Your Business in no Time!

How can you grow your business from earning $50,000 per week to $1 million per week within a relatively short period, around 20 months. Professor Charley emphasizes several key strategies for achieving this remarkable growth:

Focus on what makes the business work.

  1. Focusing on What Works: Instead of chasing various opportunities to make money, Professor Charley focused on identifying what made their business work. They emphasized the importance of concentrating efforts on one area to become proficient, citing the analogy of a barista who specializes in making lattes rather than trying to handle multiple tasks poorly.
  2. Identify the product with the highest lifetime value and second purchase rate.
  3. Identifying the Best Offer: Professor Charley mentioned that the key was not necessarily the product with the highest average order value (AOV) or the best customer lifetime value (LTV) but rather the product that could generate a high volume of sales at a low cost per acquisition (CPA). They also highlighted the significance of products that were more likely to lead to repeat purchases.
  4. Use the profitable scaling margin (PSM) metric to evaluate business opportunities.
  5. Long-Term Focus: Professor Charley stressed the importance of looking beyond day-to-day profits and thinking about the future cash flow of the business. They noted that it’s crucial to build a brand rather than being solely focused on making one-time transactions.

Hero Product to the Rescue.

Professor Charley’s approach encourages businesses to focus on the right products or offers that not only generate immediate profits but also lead to repeat purchases and a predictable cash flow.
  • Identify the hero product that is most likely to lead to second purchases.
  • Amplifying the Business Model: By understanding the future cash flow generated by their chosen products, Professor Charley emphasized that they could evaluate their advertising spending based on the future value of that money. This involves projecting the returns from their ad investments over a longer time horizon.
Focus on promoting the hero product to scale the business. To scale a business, it is important to focus on what makes the business work. This means identifying the product with the highest lifetime value and second purchase rate. The lifetime value of a product is the total amount of money that a customer is expected to spend on that product over the course of their relationship with the company. The second purchase rate is the percentage of customers who make a second purchase from the company. Once you have identified the product with the highest lifetime value and second purchase rate, you can use the profitable scaling margin (PSM) metric to evaluate business opportunities. PSM is a metric that measures the profitability of a business opportunity. It is calculated by dividing the profit by the sales. The higher the PSM, the more profitable the business opportunity.

Let’s do the Math.

To answer the question about how a small business can go about the metrics necessary for scaling, the key metric recommended by Professor Charley is “Metrical Profitable Scaling Margin” (PSM). This metric is calculated as follows: PSM = (Customer Lifetime Value) / (Sum of Cost per Acquisition + Cost of Goods + Frequency of Purchases) Here’s a breakdown of the components:
  1. Customer Lifetime Value (LTV): Calculate your LTV by dividing your total revenue by your total number of customers. This gives you an average LTV per customer.
  2. Cost per Acquisition (CPA): The cost to acquire a customer, including advertising costs.
  3. Cost of Goods: The cost to produce the goods or services you sell.
  4. Frequency of Purchases: How often, on average, a customer buys from you.
With these values in hand, you can calculate your PSM. A higher PSM means that you’re generating more value from each customer relative to your costs, which is a good indicator of potential for profitable scaling. By increasing your PSM, you can confidently plan your advertising investments and predict your future cash flow.

Time to Promote! 

After identifying the hero product that is most likely to lead to second purchases, you can focus on promoting it to scale the business. This can be done through a variety of channels, such as advertising, public relations, and social media. Here are some additional tips for scaling a business:

  • Invest in marketing and sales.

  • Develop a strong team.

  • Build a strong brand.

  • Innovate and stay ahead of the competition.

  • Be patient and persistent.

here is the full video that inspired me to write this blog.