5 Percent Increases Mean Stable Business

I used to go to a small coffee shop/diner. They served a very unique fresh breakfast and lunch. I had gourmet coffee served in actual mugs and great sandwiches like an egg and avocado sandwich for breakfast. I used to love to go there in the morning to get my day started. It was a classic, small town, hipster coffee shop that served lunch too. I became friendly with the owner and she read my first book. One day we were talking about business and she was telling me how she worked a second job. I was shocked. I didn't know it was possible. Running a restaurant that is open six days a week takes up a lot of your time. She told me that the shop that I so loved to hang out in was probably going to close. In a selfish effort to keep my favorite place open, I suggested that she just raise the prices by—you guessed it—5 percent.

She was hesitant and didn't seem open to the idea. I explained that if people liked the food and the environment, they would pay a little more. She didn't take my advice, and to be honest I didn't really push it. Eventually my favorite place closed down. A couple of months ago, I found out that they had reopened in a very high-rent area. I went by and the place was thriving. There were people literally lined up out the door for lunch. The menu was slightly different and there was a lot more to offer. The biggest thing I noticed was the prices. Her prices were about 20 percent higher than her previous place—way more than 5 Percent More. They were higher, but the quality was the same as before and people were still coming. She most likely increased the prices to pay the rent, but ultimately to improve the bottom line and maintain solvency. Over the holiday season, I ran into the owner and she hugged me and looked at me without saying a word. Her eyes and embrace said it all. She is now in a much bigger place, with much higher prices, and also much higher revenue and profit.

Recently, I came across an article that helped crystallize the point of the above story. If you have a good product, sell the product, not the price. People will always pay more, especially just a little bit more, for a great product or service. Over the years I have been forced to raise my prices, and I was always reluctant. The salespeople pushed back, management told me I was crazy, but it was the only option we had in order to maintain our business and continue to grow. Don't be afraid to increase your prices. People will always pay more, especially if you are already adding value to their lives.

5 Percent More at Work

Let's assume your business is generating ten million dollars in gross revenue annually. That equals $833,333 per month. Let's also assume that you have a 7-percent profit margin on that $10 million. If you could find a way to become 5 Percent More efficient and, as a result, generate 5 Percent More revenue each month while keeping your costs relatively the same, the following year you would have close to three hundred thousand dollars more in profit. You can continue to do the math, but even if you stayed the same as month 12 for the entire third year, your profit margin continues to grow.

$833,333.00 × 1.05, or 5 Percent More, equals:

• Month 01 = $875,000
• Month 02 = $918,750
• Month 03 = $964,687
• Month 04 = $1,012,921
• Month 05 = $1,063,567
• Month 06 = $1,116,746
• Month 07 = $1,172,583
• Month 08 = $1,231,212
• Month 09 = $1,292,773
• Month 10 = $1,357,412
• Month 11 = $1,425,282
• Month 12 = $1,496,546
• Total for that year is $13,927,479

Smarter Than Albert Einstein and Better Than the Domino Effect!

I recently picked up the book The One by Gary Keller, and in the first few pages it refreshed my memory and understanding of geometric progression, which I learned about as general counsel of the multilevel marketing (MLM). Now, I am not a mathematician, so I will explain this mathematic principle as simply as I can. It is basically the mathematical formula by which you multiply by the same factor each time. For example, to create the sequence 1, 3, 9, 27, 81, 243, 729 and so on, I am just multiplying by the same factor—the number 3. As you can see, we went from 1 to 729 in just six steps, geometrically progressing by three. The powerful nature of this formula is how quickly you can accomplish things just by making small increases.

Discussing the domino effect, Gary Keller described a domino geometric progression: By doubling the size of the first domino, which is only two inches, by the time you get to the 57th domino it is as large as the distance from Earth to the moon. The challenge with geometric progression is that most people, and I mean most people, cannot double their efforts consistently time and time again. The theory is powerful and shows how small changes—increasing the last result by the same factor at each step—can have huge results, but applying it to everyday life is unrealistic and beyond the reach of most.

I first learned of the principle of geometric progression at an opportunity meeting for the MLM for which I was general counsel. The owner of the company told the crowd how Albert Einstein once said that geometric progression is the most powerful mathematical formula to have ever been discovered, but, more important, it could make people rich. An opportunity meeting is usually the first meeting when someone is recruited to come learn about the company and the opportunity of signing up. It is a sales presentation at its best. At this particular meeting, the owner was in a $2,000 custom suit, red power tie, Brioni shoes, and a solid gold Rolex. He described how the MLM worked, and it was pretty simple. All he asked was that each person sign up two people, who then sign up two people, who then sign up two people, and watch their organization grow. Some would call this a pyramid scheme, but it's actually a pyramid dream.

In MLMs, like most sales organizations, only a few people are able to do what the perfect sales pitch requires to make the real money. It isn't as sexy if someone were to get up in a room and show what a gradual 5 percent increase month after month looks like versus doubling or tripling their production. But this dream pitch is ultimately where most MLMs fail. Geometric progression may, in fact, be the most powerful mathematical formula to make you rich, but it isn't attainable and it's unrealistic when presented in a manner of progressing by multiples of two or greater. Rather, a small percentage is what is not only realistic, but also attainable, and can also make you a lot of money!!

What I am asking you to do in 5 Percent More is not to double the size of your domino so that you will be on top of the moon quickly; rather, what I am saying is, to get to the moon, don't fantasize about it. Geometric progression is just a mathematical equation to show you the power of small changes, but the examples of progressing by double or triple factors are not the recipe for success. You can't eat a whole elephant by doubling your previous bite, but you can if you slowly increase the size of your bites. A 5 percent geometric progression will yield much better results, so that what starts out as a really minor change will get you major results. But the key is consistency even when faced with adversity. When you fall short, keep at it and keep working even when it seems like it isn't working. It will. I promise.

I'm Wrong

I've studied success and experienced success at a level that most people can't comprehend. Some people at the top appear to be doing things at a pace that is beyond what the average person could even fathom. And they are. But they have compounded on their success. They didn't just get to the level they are at; they worked at getting there. There are programs and seminars out there that tell you that you need to go a hundred miles an hour at all times to get to where you want to go. These books and seminars work for a small, limited part of the world's population and usually are not able to sustain success. Do just a little bit more at each level and you will not only achieve success; you will maintain it. So when you see how a person is working hard and putting in countless hours and they have attained remarkable success, remember it didn't just happen; it was a progression.

Troubled Past to Taking Just One Class

I am close with a woman whom I've known for most of my life. She has struggled with addiction and anger issues throughout her life. Her childhood wasn't the best: her parents were both drug users, her neighborhood was riddled with drugs and crime, and she became a product of that environment. I've always tried to help her in any way I could. I've mentored her, given her a job, had many heart-to-heart talks with her, and encouraged her to seek counseling, but things never really got through.

Several years ago, she seemed like she was turning her life around. She had a steady job and enrolled in classes at the local community college. I was very proud of her, until she got arrested for dealing large amounts of marijuana. Needless to say, her college days were over. After a fairly lengthy legal battle, she took a plea and agreed to two years in the house of corrections at the female prison in Framingham, Massachusetts. I stayed in touch with her, wrote her, visited her, and put money in her commissary. I reminded her during her time that she was locked up to try to take advantage of the programs the jail had. But she didn't do anything to improve her life while locked up. She just did her time.

Well, after she had been out for some time she was still struggling to find her way. Again, I took her under my wing, encouraged her, and tried to steer her down the right path. Nothing seemed to work, until a few months ago when something clicked. I said, “Hey why don't you take a class? Just one class. Taking this class will challenge you and introduce you to new people and new things.”

Well, she is now in just one class and excited about life. She now has vision and has enrolled in one other class in the spring. These small steps, 5 percent moments, I believe are what are really going to change the trajectory of her life. You can see it in her eyes and in her voice. Even her text messages are more positive and upbeat. One small step toward her original goal of getting her degree has now given her hope and purpose.

5 Percent More Customers

In any business, one of the most difficult things to do is acquire customers. The next thing a business must do is to cultivate those customers. Successful businesses, the ones that have been around for a long time and will always be around, know how to do that. What I mean is, they spend more time than their competitors with their customers, from offering their customers incentives to buy more products, to just picking up the phone and saying hello.

I discussed rapport building in Ask More, Get More, but what really provides a solid foundation that will ensure longevity in the business world is the ability to connect and interact with one's customers. In my business, we generate thousands of leads every week. But these are actual customers, not just leads, who have decided to spend their hard-earned money on one of our products. I learned early on that staying in touch with those customers, engaging those customers, and talking with those customers have allowed us to grow and build a solid foundation. A very successful business owner told me one day that it is much smarter in business to spend a little more time with your current customers than to neglect those customers and chase leads that may never turn into customers. In business, we always need to be looking for new customers, but we also need to step back, slow down, and figure out a way to spend more time with our current customers. They have already decided to buy from you and they will most likely buy again. I could write a lot more about this concept and, in fact, I do a webinar training specifically about how to spend more time with your customers in an effort to grow.

This is not a new concept, but it is a sound business principle that totally fits into the 5 Percent More model. A little more time with your current customers will reap long-term benefits for your business.

Just a Little Bit More!

When being interviewed by Forbes magazine in 2000, Lindsay Owen-Jones, the then-CEO of L'Oréal, one of the most—if not the most—successful cosmetics company in the world, was asked why L'Oréal was crushing its competition, and she said, “We just love the business a little bit more than our competition.”¹

L'Oréal is at the pinnacle of cosmetics, at a level that many cosmetics companies aspire to, and, according to their leader at the time, they just loved the business a little bit more and that's what made them great. OJ, as he was referred to, ran that company for 30 years, and his success and his company's success were due to loving and caring just a little bit more than the rest. Sounds a whole lot like the 5 Percent More mentality at work to me.