Increase in sales. Talk about how to get more money from your business at no extra cost.
The formula for increasing sales and volume: 5 basic elements
But first, let’s define what the company’s profits are made of and on which its quantity depends.
Each of you has now scrolled through the dozens or even more than a hundred variants of the answer to this question.
And, indeed, a lot of factors affecting the success of a business! Starting from the name of your company and ending with the general economic situation in the country and in the world.
And the more factors we recall, the sadder the picture becomes, and this is all because we can influence everything to improve the situation.
And here is the time to do a good deed for yourself – to focus your attention on those parameters that only you can influence.
So, where should you start to increase profits? Of course, from the analysis of the current situation. And here, where to begin the analysis, we will now analyze in detail.
There is a very specific mathematical formula for increasing sales and profits, allowing you to calculate the amount of money on hand for a certain period. And it looks like this:
P – is the profit
of the enterprise for a certain period, measured in dollars;
Leadsis the number of potential,
i.e. interested customers.
In the case of a retail store: these are all who have entered the store for a certain period, regardless of whether they bought it or not. In the case of wholesale: this is all who called, left a request on the site or came to the trading floor;
Сv – conversion,
the ratio of the number of people who have come to the number of people who bought.
For example, 300 people called you in a month, of which 100 made purchases. Coefficient Cv = 100/300 = 0,33
$ – The average check is measured in dollars.
We consider the average check: the amount of money on hand we divide by the number of buyers who provided it;
For example, 30 000 went to the cashier per day., And the number of people who bought it was 10 people. That means $ = 30,000 / 10 = 3,000.
****Moreover, if you have products in very different price segments, it is better to read the average bill for each product separately.
# – the ratio of the number of buyers who have made repeated purchases.
For example, in one month, 12 out of 100 buyers returned and made more purchases. Thus, # = (12/100) +1 = 1.12.
Perhaps for the selected period you have this indicator will be equal to one, that is, people do not make repeated purchases.
M – margin ratio, i.e. markup on the goods.
For example, if the mark-up on a product is 150%, then M = 1.5, or if the mark-up is 300%, then M = 3.
Important! All calculations are done for a certain period. Moreover, be sure to take into account seasonality.
That is, if 300 people call your business for 1 month, 100 of them make purchases, an average of 3,000, after which 12 people make repeated purchases over the same period, and the mark-up on the goods is 150%, then your company’s profit will be:
300 x 0.33 x 3 000 x 1.12 x 1.5 = 498 960.
Voila! A good visual result for the formula of possible profits?
WHY DOES IT NEED TO KNOW?
And now the question: why is all this necessary? Taking measurements, counting people, recording repeated purchases, counting the average bill, which is constantly changing – all this takes time and effort. Is not it easier to count the money on hand for the period?
Before answering this question, here’s another task:
What will happen if we increase each indicator of this formula by only 10%?
For example, in one month you began to call 330 people, instead of 300. It became 110, instead of 100. Each buyer began to buy an average of 3,300. And 13 people returned for repeated purchases, instead of 12. And the markup will be 160% instead of 150% .
Again we take the calculator and: 330 x 0.33 x 3 300 x 1.13 x 1.6 = 649 740
That is, by increasing each indicator by only 5-10%, we get an increase in profits by as much as 30% !!!
These are the main 5 indicators of which your business consists and the formula for increasing sales. Pay attention, the main ones, this does not mean the only ones. But my advice to you, start with them to increase profits. Namely:
- Count the number of incoming applications / visitors
- Learn the conversion from leads to purchase
- Calculate the amount of the average check for the past day, for the last week, for the previous month
- Identify the average customer return period for re-purchase
- Identify your margins
As a result, calculate the profit of your company for the selected period of time according to the formula of the explosive increase in profits and sales volume described above, and estimate the possible options to influence these indicators.
And remember, to overcome the invisible barrier, you need to clearly know its size. Therefore, measure your business, recognize it anew, translate it into clear numbers, and then your every action will gain confidence and perspective.