Articles

How To Increase Your Sales Turnover By 26%

April 18th, 2010

If someone was to ask you what your key sales figures were what would be your answer?

Would it be number of units sold, gross profit dollars, turnover or something completely different?

The simple formula below is what I consider to be the sale engine of any organisation – it doesn’t matter if you are in retail, professional services, trades or anything else for that matter – these numbers drive your cashflow and profitability and they need to be the mantra that you are continually repeating to yourself and all your staff.

Sales engine
Leads x conversion rate x average sale price x numbers of times purchased = turnover x gp% = gross profit dollar

And remember it is vital that you measure the output of every part of your engine, otherwise you may be driving on only two cylinders and not even know.

Let’s look at these in a bit more detail.

Leads
This is how you get the customer to look at what your business is offering. Leads may be generated by:

• A customer’s previous experience with you
• Referrals
• Active local marketing
• TV or radio
• Your position in the market
• Your database
• Networking opportunities
• Pester power (normally kids wanting mum and dad to go somewhere)
• Supplier promos
• Signage

Getting someone to look at what your business offers is only the first step – once you are in front of them you need to be able to sell your product or service to them – convert the lead into a sale.

Conversion rate

You might convert the lead into a sale by:

• Listening to the potential client and see what it is they actually want
• Just taking the time to ask for the sale
• Having the goods or service available that they are after
• Having a robust sales process
• Understanding what it is you have to offer and how that will benefit the client
• Being open when they are ‘looking’
• Having better qualified leads
• Taking the time to follow-up on any sales query
• Building relationships with your client

Average sale price

Do you know on average what your customer spends with you? If you don’t it’s hard to know if that spend is increasing or decreasing. The average sale price can be increased in a number of ways:

• Upselling and cross selling
• Regular price reviews/movements to reflect the market demand
• Making sure the client is aware of all the goods and services you have to offer
• Making sure that all billable work is charged for
• No discounting
• No giving goods or services away (unless part of your sales plan)

Number of times a client buys from you

This is the lifetime value of your client. What is better –have them purchase only once or twice, or have them purchase on a regular basis over a number of years? Pretty obvious really isn’t it, but all too often people are focused on ‘this sale’ rather than the next sale.

Ways to keep them coming back:

• Exceed expectations all the time
• Ask them to come back
• Understand what they want and need
• Build strong relationships
• Keep your promise and do what you say you will
• Have their interests at the front of your mind. If you just focus on the dollar and not providing what they want you will reduce the amount of value you are able to offer

Gross profit %

The difference between the sale price and cost of sale – what its cost to get the sale to happen. Ways to increase your gp% might be to:

• Increase sale price
• Reduce cost of sale (no real rocket science there!)
• Vary the sales mix

How to increase your turnover by 26%

Let’s look at the results we can get by tuning different parts of our sales engine. For this example we’ll make a couple of assumptions:

– Customer only buys once
– We know existing sales numbers
– Tuning of the engine is only small (but the results aren’t!)
– This example is on an annual basis

   Current Slight increase 5% Moderate increase – 8%
Leads 30 leads a month360 leads a year 31.5 leads per month378 leads per yearIncrease of 5% 32.4 leads per month388.8 leads per yearIncrease of 8%
Conversion rate Currently 45% 47.25%Increase of 5% 48.6%Increase of 8%
Number of sales 13.5 sales per month162 sales per year 14.88 sales per month178.56 sales per year 15.74 sales per month188.9 sales per year
Avg sale price $1500 $1575 $1620
Turnover $20,250 per month$243,000 per year $23,436 per month$281,232 per year $25,498 per month$305,976 per year
GP% 52% 54.6% 56.16%
GP$ $10,530 per month$126,360 per year $12,796 per month$153,552 per year $14,319 per month$171,836 per year

So what’s easier, increasing turnover by 26% or getting another 2.3 leads per month?

One leads to another and if you know what drives your economic engine you can get some interesting results. If you’d like to know more contact John at PlanA Consulting.   ([email protected])

It’s not the plan that is important, it’s the planning
Dr Graeme Edwards

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