I often hear from clients that they want to double their revenues next year. Or their goal is to increase their sales by 50%. If I ask them how they are going to do it they start listing of a bunch of things like marketing, networking, social media, product creation, etc.
They rarely look at the “magic” of the numbers.
So here is a very cool reality; there are only 4 ways to increase your revenues:
- Make new sales
- Increase the value of each sales
- Sell more often to existing customers
- Retain customers
Now comes the fun part, if you want to double your revenues you can do this by focusing on changing 5 factors by only 20%.
Here are the 5 factors you need to increase:
- Number of leads
- Number of conversions to sales
- Average sales dollar value
- Number of sales per year per customer
- Number of years you have a customer
So how does that work? Let’s say a business captures leads by holding local seminars. The number of leads that capture over the last year was 500, there were able to convert 5% into sales with an average sale of $1000. Most customers bought twice in the year to yield gross yearly revenues of $50,000. IF they keep those customers for a year with the same buying habits then the 2 years revenues will be $100,000. (See the table below) Now look at the second column in the table highlighting what happens if each factor is increased by 20%.
|
Existing |
Increased by 20% |
|
| Number of Leads |
500 leads |
600 leads |
| Conversation to sales rate |
5% |
6% |
| Resulting number of customers |
25 |
36 |
| Average revenue per sales |
$1000 |
$1200 |
| Number of sales per year |
2 |
2.4 |
| Gross Revenues for the year |
$50,000 |
$103,680 |
| Number of years they stay as a customer |
2 |
2.4 |
| 2 years gross Revenues |
$100,000 |
$248,832 |
Isn’t that amazing, by changing 5 factors their revenues over 2 years go from $100,000 to $248,832! That is more doubled the existing year’s revenues.
Now from a planning perspective they can now focus on how to change each of these factors. For example I can an easy plan of how to bring in 20% or 100 more leads in a year. Perhaps they will hold additional seminars, increase their promotion, or offer incentives to attend.
Do you see how this works? Do see why it is so important to know your numbers and work with them?
I love to see entrepreneurs follow their passions, serve more people and create the lifestyle of their dreams.
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Wow Heather!
This is a truly awesome and extremely educational post! You’ve expertly demonstrated some incredibly powerful (and what I personally) like to refer to as battlefield tested fundamental business building concepts.
And you really did a fabulous job of doing so!
This is my very first visit to your excellent blog. I discovered your blog while posting a comment on Rachel Lavern’s totally excellent blog!
She and I are fellow members in a blog syndication network and often read, share and comment on each others content.
I saw your blog title, and knew instantly that I had to stop by! And i’m so glad I did! Going forward, I will definitely be studying here more often. The incredibly sound, proven long term business building concepts that you are sharing here, can’t be stressed enough! Thank you! Job well done!
Mark – Thank you for your great feedback. I love the fundamental of business and find so many business owners either have never learnt them or forget about them during their day to day activities. I too find Rachel Lavern’s blog provides excellent information. Thank you!
Hello Heather,
Numbers definitely don’t lie and even a much smaller percentage increase can make a huge difference over a longer period of time. Numbers are facts and always should be taken seriously. Great post.
Zaneta
Zaneta: Numbers don’t lie. There are easy to ignore and very powerful when you are on top of them. Thanks for commenting.
Heather, I love real numbers!!! Nothing hits a point home like them! whether it’s tracking your current trends or planning and forecasting future endeavours. Thank you!!
Agnes. I love real numbers too. Seeing the effect you can achieve just increasing one factor by a few percentages can be very motivating. I know the same with regards to the advice you give.
Very important to know your numbers. Also vital that you track your results so you know where to improve as well.
Barrie: Thanks for your comments. Tracking…Tracking…Tracking…is the best way to be on top of your business so that you can improve quickly and investigate downward trends.