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There are only five ways to increase your profits – here they are!

Posted on 05/07/2012, 09:50

There are really only a finite number of things that any business can do in order to increase its profits. Making the assumption you are providing a good level of service / good quality of product to your customers – we will now explain what these are!

 1. Your Number of Leads.

The total number of POTENTIAL buyers of your product or service sometimes called prospects, suspects.  Here’s the question; Do you know how many leads on average you get in your business in any time period, (day, week, month year)?  In essence this boils down your marketing and how effective it is at generating those leads and enquiries.

2. Your Conversion Rates.

The number of people who did buy compared to the people who potentially could have bought (Your Leads).  If you don’t measure this and from our experience most don’t – there is a potentially HUGE opportunity for you to increase profits and seriously improve your bottom line.  We cite an example of a recent client, who was asked their conversion rate, and they told us quite confidently that it was about 80%.  We got them to measure it over 6 weeks. The outcome: They recorded 23% and felt gutted, but this was good news, they were no longer working off of inaccurate assumptions and could start working on making REAL improvements to their figures!

3. Your Average Sale Value.

This is one area that most business owners to generally measure.  For those that don’t, start! The calculation to work out your average isn’t difficult – add the value of all your sales in a given period together and divide it by the total number of sales – This will give you the average sale value, this is an incredibly important figure as just a small increase in this average vale can have a vastly positive impact on your profits!

4. The Average Number of Transactions per Customer

Again what we’re looking for here is the number of times the AVERAGE customer/client buys from you in a year. Not the best, not the worst, some businesses have customers buying daily, some weekly some every year or even after several years.  This is a vitally important measurement.  This number is effected by your own customer service and how good you are at generating loyal customers.

5. Your Profit Margin per Sale

The percentage of each and every sale that is profit. Without insulting anyone’s intelligence this is once again a simple calculation; The value you sell something for (say £1000) minus the cost of sale (what it cost you to buy the product and any cost associated with selling the product – call it £600) Which in this example would give you a profit margin of 40%.  This is affected by all the other functions in your business – you’re either adding to or subtracting from this number with EVERY activity you perform in your business.

Remember – You can’t manage what you don’t measure.

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