Increasing Profit in your business is much easier when you know where to focus your efforts.
In any business there are 7 key areas that determine your profitability.If you know these areas and understand what’s driving your results in each area increasing profit becomes much easier. You can achieve big increases in profit just by making small improvements to each one.
The first area we call Traffic – this is the amount of exposure your business has to potential customers. An example of traffic for a retail store might be the number of people that pass the front door each day. Another example might be the number of people who see your website advertisement each day.
The next area we call Opt-Ins – this is the number of people who decide to interact with your business. In the retail store example it might be the number of passers-by who actually stopped and walked into your store. In the website example it might be the number of people who clicked on your website advertisement and ended up landing on your actual website.
The third area is Conversion – this is the number of people who actually made a transaction with you as customers.
The fourth area is the Average Sale Value and focuses on the pricing of each of your products or services. If you charge $3.60 for a coffee and you sell 1000 coffees a week the impact of putting your price up to $3.80 would be a $200 increase in revenue each week from this one simple change.
The fifth to focus on for increasing profit area is called Items Per Transaction and focuses on how many individual items are sold, on average, in each transaction. Supermarkets are notorious for this with their Point of Sale merchandise. They know that by putting lollies and magazines at the checkout they will make a noticeable increase in their items per transaction and therefore increase their total sale value.
The sixth Profit Leverage Point is Transactions Per Customer. This area focuses on how many times a single customer transacts with you.
And our final Profit Leverage Point is Gross Margin which focuses on the percentage of Gross Profit we make on the sale of each product or service.
When it comes to increasing profit these 7 Profit Leverage Points give you a huge amount of power to improve your business performance. If you improve the performance of each area by just 12% you will have doubled the profitability of your business. By continuously focusing on working out strategies to improve your performance in each of the 7 Profit Leverage Points you can create a very healthy and sustainable business model.
If you’d like to find out how quickly and easily you can improve the performance of your 7 Profit Leverage Points get in touch with us here for an obligation free chat.