Are you looking to grow your profits? How about 64%? In this video, we will go through the five ways to increase your profits in your business. And I’m going to show you how to get a 64% increase in your profits using minimal investment.
So you might be wondering what are those five ways to grow your business profits?
Let me tell you that the five ways briefly are: Our number of leads, how many people that you actually talk to conversion rate, what percentage of those leads do you actually sell?
That gives you your number of customers. So that’s the first two number of leads and conversion rate.
Now your number of customers X your number of transactions.
That’s how many times they actually purchase from you.
On average times, your average dollar sale. How much they spend with you on average gives you your revenues, so those are the next two number of transactions, average dollar sale.
Your number of customers X your number of transactions X your average dollar sale gives you your revenues.
Your revenues X your margins, that’s the fifth one, give you your profits.
So the margin is what percentage of what you sell, what you bring in, do you get to keep as profit?
Those five areas are the five ways that you can increase your profits. Now let me throw in some numbers so that you can kind of get an idea of what I mean here.
So if you have 4,000 leads and you have a 25% conversion rate, that would mean of the 4,000 leads that you bring 25% would become customers. That would give you 1000 customers. If on average, those customers buy from you twice. Now, some might buy once. Some might buy dozens of times. It doesn’t matter.
The average, we’re going to say is 2 and the average amount they purchase is 100 dollars. The amount of the sale is 100 dollars. That’s an average. So some might be a penny, some might be 1000 of dollars. It doesn’t matter if the average is a 100 dollars.
Then 1000 customers X 2 transactions X 100 dollars would mean $200,000 in revenues.
Then if we have a 25% margin, that means we would have 50,000 in profit right now. That’s just some numbers so that you can kind of get the idea of what I’m talking about. Why is this important? It’s important because when we start to increase these numbers, multiplied together, it makes a huge difference.
So what if we only increase them by 10%?
So if I take my number of leads 4,000 and multiply it by 10%, that gives me 4,400. If I take my conversion rate of 25% and multiply that by a 10% increase, then I get 27 and a 1/2 %. Now I take that 4,400 leads and multiply it by my 27 and a 1/2 % conversion rate. That gives me 1,210 customers, not 10% more like the other two 10%, but 21% increase in the number of customers because I’m multiplying it together.
Now, if I look at my number of transactions as to increase that by 10%, then I get to a point to my average dollar sale of 100, increased that by 10%, I get 110. I multiply those out and I get approximately $293,000. That’s a 46% increase and my revenue’s pretty good now.
Well, if I take my 25% margins and multiply that by 10%, then I get 27 and a 1/2% margin. I take my $293,000 in revenues, multiply that by my 27 and 1/2 % margins. I get approximately $81,000 in profit. That’s a 64% increase, 64%, and some of these strategies are very inexpensive. So let me tell you how we want to go through these strategies.
You might think the first one is margins and many people will tell you the first one is margins, but I’m not going to tell you that. Although margins are not a big investment, typically if you’re running your business, they can be very expensive because we need to actually find ways to lower those margins or actually those margins, but lower our expenses, that might cost a fair amount of money.
So the first place that we go is the place that’s going to cost us either nothing or the absolute least amount. And the first place we can go to, there is conversion rate. If we can get better at selling and we can convert more of the people that we’re talking to that way we can make that difference fast and easy, and conversion rate is about sales training.
It’s about learning to sell better. It’s about having better scripts. All of which costs you nothing.
Then we move on to average dollar sale. Average dollar sale is how much we’re actually selling them in that sale. Again, this is very inexpensive. It’s about how do we do these scripts again, it’s about having sales skills so that we can then sell more.
You see, these are very inexpensive ways to start to increase our profits without a big investment.
Next, we go to number of transactions. Now, number of transactions is marketing, which can be expensive, except this is marketing to people who are already customers, which is at least 10 times less expensive than marketing to new people, because these people already know you.
They already like you. They already know they want what you’re offering. So you’re much more likely to make that sale.
As the fourth one will go into margins, because now we’ve actually started to make some difference in our revenues and started to bring them up. So now we can invest in some margin strategies to try and make sure that we’re bringing as much profit out as possible. By the way, the changes we made and the others will probably have already impacted your margins. Only at the very end, are we going to invest in number of leads because that’s the most expensive strategies there are.
So that’s how we make sure that we can make the most bang for our bucks inside of marketing, to bring in more business in, more profits into our business. And all of this is covered in what we call the first step.
The first step of building our business, building a business that truly works for us is all about making sure that our foundation is in place, and that foundation is what will make sure that we can have a business that truly works for us.
Once we have the foundation in place, and this is getting rid of the chaos, putting in control, making sure that we have a nice stable business, then we can move up to the niche level. Remember we said, number of leads, we’re going to cover only last because number of leads is expensive. Marketing is expensive. So we’re going to focus more on marketing when we move into the niche level.
Step three is when we bring in the systems and we make sure that we have plenty of leverage in the business. So in the first step we brought in the foundation in the second step we brought in the marketing and the cash. So we have stability. We have cash. The third step we bring in the leverage that gives us efficiency and time in the next step.
And the fourth step we’re going into team. This is where we start to make sure that our team can run the business as well as we can. Right? So that brings in the structure for growth. Once we have the structure for growth in place, then we can bring in team leaders or a general manager for the business, and we don’t have to be there all the time making sure that things run smoothly.
That brings us into the fifth step, which is synergy, where we can take that step back, turn up the volume, make sure that we clean up any cracks in our foundation. Making sure that we have our marketing working perfectly, that we have our systems working perfectly, that we have our team working perfectly
We can just keep turning up that volume, which automatically takes us to our sixth step, which is results and this is where we get the business that truly runs without us. We get the time, money and freedom from the business that we went into business for in the first place.
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Thank you for watching. I look forward to seeing you in the next video.
About the author, Doug Barra
With 14 years of experience in working with small and medium sized businesses to help them grow, Doug is committed to seeing business owners thrive. Business coaching is what drives Doug.