Page 143 - merged.pdf

CHAPTER 5 MULTIPLYING YOUR BUSINESS PROFITS

The Net Profit Margin of your business would be Net Profit
divided by Sales Revenue. In this case, the Net Profit Margin
would be $120,000/ $480,000 = 25%. This means that for
every $1 of sale, you would earn $0.25 as profits.

Once you know the average ‘Net Profit Margin’ of your
business, you can calculate your net profits by multiplying
Sales Revenue by Net Profit Margin.

SALES REVENUE X NET PROFIT MARGIN
= NET PROFITS

Obviously, to make your business highly profitable, you have
to use the right strategies to ensure that your Net Profit Margins
are as high as possible!! Unsuccessful entrepreneurs always
fail to monitor and control their margins. So they may sell
many products and get lots of customers, but end up making
very little or even losing money.

Putting Together the Profit Multiplication Formula

Let’s put everything together and see how your business’s net
profits are derived.

Leads
x Conversion Rate
= Number of Customers
x Average Dollar Purchase
x No. of Repeat Purchases
= Sales Revenue
x Net Profit Margin
= Net Profits

134 SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES