5 Ways to Increase Your Business Profits

When you ask yourself what would make your business more successful, the most obvious answer is probably making more money. It sounds simple enough. Now, if only you could snap your fingers and make it so.

While increasing your earnings may not be quite that simple, it might be less complicated than you would imagine. You just have to keep five key factors in mind.

The “5 Ways to Increase Your Business Profits” model is taught widely throughout the business and entrepreneurship world. The model consists of five key components. Let’s get to know them.

1. Leads – The number of people who have contacted or who been have been contacted by your business in the course of a year.

2. Conversion Rate – The percentage of people in contact with your business (the leads) who actually make a purchase. For example, if your business meets with 10 leads in a week, but only four sign on as clients, your business’s conversion rate is 40 percent.

3. Number of Transactions – This is the average number of purchases one customer will make in a given year. While not a rule, this number is often highest when prices are lowest. For example, in one year, a customer may make 100 purchases at a coffee shop, but would likely not make more than one purchase at a car dealership.

4. Average Dollar Sale – The average price of sales for one year. Using the examples from above, a coffee shop may see an average dollar sale of a few bucks, while a car dealership might see one of tens of thousands of dollars.

5. Profit Margin – How much you, as the business owner, make from a sale. If you sell a cup of coffee for $4 and it took you $2 to make it, your profit margin is 50 percent.

The 5 Ways Formula

Now that you know the key components, let’s look at how they result in a profit.

Leads x Conversion Rate = Customers

Customers x Average Dollar Sale x Number of Transactions = Revenue

Revenue x Profit Margins = Profit

As you can see, each of these five components plays a significant part in how much you profit. So, imagine if you increased each component by just a small percentage. Increasing all five areas of this formula by 10 percent can result in a profit increase of 61 percent. That’s a big result for a small increase!

The coaches at ActionCOACH Tampa Bay can equip you with the strategies to make increases that will ultimately lead to more money in your pocket. Visit our website to see success stories from our clients and call us today to learn how we can help you succeed!



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