Page 146 - merged.pdf

CHAPTER 5 MULTIPLYING YOUR BUSINESS PROFITS

The Impact of Increasing Your Profit Variables
by 10%

After measuring and determining your profit variables, you
then employ specific marketing strategies to increase and
improve each one. Imagine if you were to just increase your
leads by 10% more a year. Through savvy advertising and
promotion, it would be easy to increase your leads from
40,000 to 44,000 annually.

At the same time, you employ more effective sales strategies
and promotional tactics to up your conversion rate and average
dollar purchase by just an additional 10% respectively.

You then create a loyalty program and initiate customer
retention strategies to increase your repeat sales by 10% more.
Finally, you find ways to cut unnecessary costs or find cheaper
suppliers to increase your net margins by 10%.

From the table below, you can see that by working at increasing
each of the five profit variables by a mere 10%, your Net
Profit grows from $120,000 to $193,261. That’s a whopping
62% increase! That is the effect of compound growth, where
small increments lead to large effects.

Increase by 10%

Leads 40,000 44,000

x Conversion Rate 15% 16.5%

= Number of Customers 6,000 7,260

x Average Dollar Purchase $80 $88

x No. of Repeat Purchases 1 x/yr 1.1 x/yr

= Sales Revenue $480,000 $702,768

x Net Profit Margin 25% 27.5%

= Net Profits $120,000 $193,261

SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES 137