When you think about it, there are five key financial levers that will increase profits in an organization.
- Lead generation – How many different sources are you tapping into?
- Conversion Rate – Most small business owners grossly over estimate how many qualified lead they turn into an actual sale. Start keeping track of this and the whole system will get more honest.
- Number of Transactions – How many times are you selling to the same customer? What is your share of their wallet?
- Average dollar sale – in retail is called average basket size or average transaction. This may be the easiest metric to improve on. Is easy to sell more to an existing customer if they trust you.
- Margins – Raising prices is the easiest way to make money, though I admit, not always possible. But if you think about it, when you raise your price, and if all costs and overhead expense remain the same, that additional money will fall to your bottom line.
Improving more than one (ideally all five), has an incredible multiplier effect. It starts with an accurate set of accounting records. You should also track this in Excel, or even on paper, just don’t trust your gut. If you want to use my Excel template, send me an email and I’ll forward you a copy.