Do you truly understand your sales? It seems simple, but without the full knowledge of how this key component works, you could be putting your company at a disadvantage. In this article, we’re going to help by simplifying this concept into basic equations.
The famous marketer, Jay Abraham, championed the idea of “Three ways to grow a business”, which describes a powerful way of looking at how sales are made up. He describes it like this:
SALES = NUMBER OF CUSTOMERS
x AVERAGE AMOUNT OF EACH TRANSACTION
x AVERAGE NUMBER OF TRANSACTIONS IN A YEAR
From a marketing perspective, this is very powerful. Most businesses focus on the first component (number of customers) when looking to grow when in reality, the second and third are often much more powerful.
Let’s simplify the terminology into this:
SALES = CUSTOMERS
x AMOUNT SPENT
x FREQUENCY of SPENDING
We now have 5 drivers of profit in our business model:
PROFIT = (CUSTOMERS x AMOUNT SPENT x FREQUENCY of SPENDING)
– VARIABLE COSTS
– FIXED COSTS
This is now much more useful in helping us to grow a profitable business. Particularly when we create a financial model so we can see the impact of any changes on both costs and profit.
We’re proud to offer a Transformation Map that helps your business use pertinent information, such as this, to really understand and in turn grow your sales. If you’d like to begin your transformation, book your Discovery Call now! Want to read more? We have launched an E-Book that dives into these topics and lays out the steps to small business success one by one.