Why testing is essential to growing your business and maximizing profit

​Most business owners assume that once something is generating a profit, it has been optimized. But they may be missing out if they don’t stop to ask how much better it could actually be performing.

On today’s episode of Strategic Edge, Jay Abraham, executive coach and founder and CEO of the Abraham Group, says many businesses are sitting on significantly more profit than they realize and that “de-risking” experimentation is the path to unlocking untapped revenue.

The case for testing

Many business owners treat testing as an afterthought. They try something, see what happens, and move on. Abraham says that approach leaves significant profit on the table.

He compares the discipline to the pharmaceutical industry. Drug companies constantly test new medications and products, Abraham says. They are always pursuing the breakthrough that will outlast their current offerings. Abraham says every business, regardless of size, should operate the same way.

"You've got so much more internal upside existing just in what you already do. You don't realize has a much more levers in it that you never pull."

The majority of small and medium-sized businesses, he says, have no idea how much untapped upside exists in what they already do. They find something that generates a profit and stop there. They never test higher and better-performing alternatives.

“The concept of testing should be to any size, type, or scope company, their lifeblood,” he says.

For Abraham, good enough isn’t good enough. He stresses that most business owners who assume they have reached optimal performance haven’t come close.

Testing that teaches

The first step is knowing what can actually be tested. Abraham gives advertising as an example. A single ad contains multiple testable elements: The headline, the offer, the risk reversal, the bonus, and the price. Each is a variable that can be isolated and measured independently.

Other examples of testable variables include a salesperson’s opening phrase, trade show signage, or even the subject line of an email. Abraham says that changing any one of those elements alone can multiply results by 5 to 10 times.

The key, he says, is testing one variable at a time. Changing multiple elements at once produces data that cannot be interpreted. If results improve, there is no way to know which change drove them.

“Everything I’m saying separately, not combined, has an enhancement capability of from 50% to five or 10 times … it’s not additive, it’s multiplicative,” he says.

Experimenting doesn’t disrupt what’s working

Many business owners resist testing because they fear disrupting what is already working. But just because something is “working” doesn’t mean it’s meeting its maximum potential, Abraham says. Profitable and optimal are not the same thing, he says. A business can be generating revenue while still leaving significant profit behind.

"You have a moral responsibility if you want to be preeminent. your company offers a better outcome for your buyer than your competitor or your buyer doing nothing you've got to get you've got to be able to help the most the maximum number possible."

Abraham suggests businesses set a testing budget and run at least two tests every month. Don’t be discouraged if the first few tests don’t produce meaningful results, that’s expected. 

He says roughly 80% of tests will fall flat, but the other 20% can double, redouble, and redouble profit again.

Take action after testing

Testing is only part of the process, Abraham says. The important thing to do after a successful test is to take appropriate action. 

Abraham says the solution is having a clear integration process in place before a winner is found. When a test outperforms the existing approach, there are two options. Replace the current system entirely. Or run both in parallel, recognizing that different buyers will respond to different approaches.

The compounding effect of sustained testing, he says, is where the real opportunity lives. Two tests per month. Twelve months a year. Over five years, that is 120 experiments. Even at a 20% success rate, he says the results are significant.

“If you do this every year for five years, you’ll have 25 breakthroughs that your competitors don’t,” Abraham says.

Rethink testing as an essential element

Don’t think of testing as an additional expense or a disruption. Think of it as an essential element to maximize your business potential.

“It’s not about spending more money,” he says. “It’s about producing far more yield out of what you’re already doing. No more costs, no more time, no more anything, just a lot more revenue, a lot more profit.”

Businesses that maintain a disciplined commitment to testing, he says, won’t recognize themselves in five years. The ones that don’t may not be around to find out.