Improving business profits is a key objective to ensuring growth and survival. Getting from a place of poor profit to revenue abundance is actually a lot simpler than many realise. There a number of key factors involved and realistically assessing how the business is performing in the context of these metrics will provide a starting point to creating a path to higher profits. If you’re looking to increase your business’ profits then assessing these factors, and understanding how to work with them, will be crucial.
Five key metrics for any business looking to increase profit
1. How many leads does the business generate?
Lead data is a crucial key performance indicator and one that will be essential when it comes to working out how to increase profits. Do you know how many qualified leads your sales funnel has within key periods, such as a week or a month? If not then this is the first crucial step to take towards increasing business profits.
2. What kind of conversion rate are you achieving?
A solid understanding of your conversion rate will provide insight into how well you’re using the leads that the business generates or whether these are being wasted. If they are being wasted then working out how to improve the conversion rate could hold the key to increasing profits. You can work out the conversion rate for your business like this: number of sales ÷ number of leads = conversion rate.
3. What is the average customer spend per sale?
If your customers spend very little per sale then finding ways to increase that could have a significant impact on the overall profits of the business. Upselling tactics or a change in marketing focus, informed by this kind of data, could help to increase average customer spend and send your profits in the same direction.
4. How many times does a customer buy from you in a specific period?
Understanding your customer and the way that they interact with your business will provide a firm foundation for marketing that can drive an increase in profits. You’ll need to work out how many sales per customer you have on average for key periods, such as a week, a month and a year.
5. What’s your profit margin?
This is a crucial piece of information as without it all your calculations are going to be based on the wrong data. The profit margin is the percentage of each sale that is pure profit – as opposed to the part that covers the cost of creating the product. You can work profit margin out like this: (Sales Revenue – Cost of Goods Sold) ÷ Revenue = Profit Margin (Percentage). Once you can see the profit margin for each product then the next step is to find ways to increase it.
All of these factors are individually crucial when it comes to creating a strategy to improve your business profits. Together, they will also provide key insight into what could be achieved in income terms with just a small adjustment to conversion rate, customer spend per sale or profit margin.
For more tips on increasing your buisiness’ profits, book your free coaching session with Brian Doubleday today.
