Every business, regardless of size, wants to make more money AND more profit but the common mistake made when looking at ways to do this is that people only focus on one or two of the elements which affect their bottom line. Imagine if you could improve all of them…
We suggest there are 5 numbers within your business which could be honed to increased turnover and profits.
This blog post talks you through these 5 numbers which, if managed efficiently, could go a long way to building the growth of your business.
We have also put these numbers, and the equation to help you understand them, into a quick and easy YouTube video: 5 Numbers Your Business Needs You to Know
At the beginning of the equation sits the number of leads which your business is attracting. This is where most companies start when they look at how they are going to grow and generate more money coming into the business.
There is often a great deal of money and time dedicated to marketing strategies, advertising and honing sales pitches to stimulate more leads for a business. Most of the time this is successful with leads being generated and businesses receiving more interest from their target market.
However, this is just the beginning of the story and endless amounts of money, time and resource can be poured into generating and stimulating more leads but if they are not applied to the equation shown in our video, it will have very little overall impact on your bottom line.
2. Conversion rate
Your conversion rate refers to the percentage of leads which you ‘convert’ into customers.
This is where smart businesses begin to really reap the rewards of their marketing investment.
Investing in the improvement of your conversion rate, even by just 1 percentage point, can significantly improve the return on investment from your marketing activities AND increase the number of customers your business has every month.
The improvement of your conversion rate doesn’t have to be expensive or time consuming. It could be as simple as improving engagement or information flow with new leads or offering enquiries something to encourage them to continue their engagement.
It will depend on what sector your business is in and what your target customer’s journey is as to how you can make improvements to their experience with you, and ultimately, your conversion rate.
This is a little less of a surprise but is a little harder to improve as a number in our equation.
However, if you can work on ways to increase the average number of purchases per customer you will make a significant (positive) impact on your bottom line.
Common methods for improving this number in our equation comes from customer service levels and perceived added value from your products and your brand in general.
By going through your customer journey and doing some customer research, you should be able to identify what your customers want that they aren’t currently getting from you. This will show you what you can do to increase the number of purchases per customer.
Common methods for increasing this number include; improvements to customer service, up-selling techniques and added value in the form of more knowledge prior to purchase (newsletters, size guides, recipe cards etc.)
This sounds like an obvious number to include in our growth equation but if you don’t use it as part of this 5 step equation, it will have little impact on your profits.
It is essential you have a pricing strategy within your business which is both competitive AND underpinned by your marketing strategy. There is no point in pricing your product or service according to the level of value you believe it to be worth if you are not effectively communicating that value to your target market.
Having established a pricing structure you are happy with, apply it to our 5 step equation and see if there is any room for manoeuvre which could see you profits increase but still see you stay within your pricing strategy.
This sounds like an obvious point but is so often taken for granted that it is overlooked.
Most businesses, especially start-ups and SMEs run very efficient, lean businesses but there is always room for improvement and looking at improving your margin per product line can have a big impact on your bottom line, especially if you are also making improvements to the other 4 numbers in our equation.
Even a small increase in your margin levels could give you a lot more profit so it is worth looking at what could be changed.
Forecast your potential growth
We have highlighted 5 areas where improvements can be made which, when combined, can grow your business exponentially and quickly!
The trick now is knowing what this growth could look like and how you might make big decisions when it happens.
Our financial forecasting software allows you to forecast your growth, manage your cash flow, make better decisions and build a strong business, quickly.
You can try our forecasting software FREE today and see what your dreams look like!