Did you know that your total sales are made up of 3 components?
These are:
1. The number of customers you have.
2. The number of times the customers buy from you.
3. The average sale price.
If you multiply these three components, you will arrive at your total sales.
Here’s an example.
Say you have 500 customers and they buy from you, on average, 3 times per year. Also assume that the average dollar value of each purchase is $150. This means your total sales will be 500 x 3 x $150 = $225,000.
This is a useful thing to know and by tracking the three components, you can work on increasing your sales. Do you know what these values are for your business?
Let’s say a business owner who understand these three components decides to work on increasing his or her total sales. The business owner engages in two actions. One is to increase the average value of each sale. The other is to increase the number of times customers purchase from the business.
The owner thinks the average sales can be increased by offering small, value-add purchases, that don’t cost the owner much to sell. He or she thinks that the average sale might increase from $150 to $160 through making these “add-on” sales each time a customer purchases.
Also, the owner considers that he or she can get customers to purchase once more per year, on average, from the business by sending out a sales flyer just before Easter in addition to some other planned actions.
When you multiply this out, this becomes 500 x 4 x $160 = $320,000. This is an increase of $95,000 or 42%.
There may be many other ways that sales could be increased, but you get the picture. A conscious decision to work on the three components of sales – and track these components – can result in a nice uplift to the top line without having to significantly change the business model.
If you would like to know more about how we can improve your business performance and ensure you are achieving your KPI’s, please do not hesitate to contact one of our team.
