Monday, March 21, 2011

Small Increases That Bring Big Profits

Too often, we find ourselves concentrating on bringing in new customers and clients as the sole method of increasing revenues and profits. Building our client base is important, no doubt. But here’s a way to substantially increase revenues by adding two commonly overlooked variables to the mix beyond bringing in new clients.

Get MORE clients to spend MORE money MORE often. Let’s say we get 10% more clients to spend, on average, 10% more per transaction, and help those transactions happen 10% more often. That scenario could look something like this:

If we have 1,000 clients spending, on average, $100 per transaction, and that happens 10 times a year, we have gross revenues of $1,000,000. Not a bad little business. Applying the formula above, we now have 1,100 clients spending, on average, $110, with 11 transactions per year for total revenues of $1,331,000. That’s a revenue increase of over 33 percent with just 10% more clients! And if we run those numbers through our funnel to determine profits, we’ll see that, in most cases, a much larger percentage of our newly found revenues go to the bottom line since our fixed expenses are already covered prior to this increase.

While your situation may differ from my example, the principle holds true for all businesses. We’ll never have exactly the same increase in all three of these areas. Growth in each of these segments is easier or more difficult from industry to industry. My point is that we altogether too often don’t look at increasing the average value of each transaction or helping those transactions occur more often as significant means of increasing revenues. Run your own numbers based on your current situation and plausible opportunities for your business and see the difference these two often-forgotten variables can make in your revenues.

Here’s to your marketing success!

Bryan Waldon Pope

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