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Yes, it’s that time of year. Retailers everywhere are getting ready for the onslaught. The late nights, the crazy time, the busy, busy busy. It goes by in a blink and then… it’s all over and you wonder what just happened to Christmas.

This year, why not make Christmas the cash cow that it should be for retailers.  Why not make it your best year ever!!

The question often though is where to start. You’re already time poor, resource poor and can’t fit another thing in.

To help, I’ll be writing a four part blog with simple, easy to follow ideas to make this your Best Christmas Ever, that take no time at all to implement.

Now before we go and get knee deep in ideas and suggestions on how to make more money, it’s important to understand sales, and specifically the 5% factor. 

In this blog we look at the 5% factor. In the next three blogs we will then tackle each one of the areas on the Sales and Marketing side (not Expenses) that put profits in your hands, and give specific examples of how you can do this over Christmas and take that momentum into 2017.

So, let’s get started:

Marketing & Sales

The 5% factor

When looking at net profit it is not how much you make, but how much you keep. The 5% factor shows that by making small changes, there is a big change to the bottom line.

Example:

Before After
Net Sales = $1,000,000
Cost of goods sold = $700,000
GP = $300 000 (30%)
Fixed costs = $200,000
Net Profit = $100,000

Increase sales by 5%
Decrease marginal costs by 5%
Decrease fixed costs by 5%

Net Sales = $1,050,000
Cost of goods sold = $698,250
GP = $351,750
Fixed costs = $190,000
Net Profit = $161,750 (61.75% increase in profit)

 

So lets look at how to make some small changes…

Decrease fixed costs
Fixed costs are items such as wages, lease and electricity. Look at the Sales & Expenses report to see your fixed costs. Review each type of expense and look for ways to reduce the cost. Examples include automating tasks and using your business management software to reduce employee wages, asking for prompt payment discounts from suppliers, reviewing pricing between suppliers, reviewing service provider companies.

Increase Sales
You can look at your annual turnover as: number of customers x average sale x transactions per annum.
Your total number of customers can be looked at as: (leads x conversion %) + retained customers

So to increase sales you can

  • increase number of customers
  • increase number of transactions
  • increase average sales value

For example

 

Before After
A store is open 6 days and retains 2/3 last years customers
15 walk-in customers per day (90/wk, 4500 /year)
Average sale $200
Average customer buys twice per year

(leads x conversion %) + retained customers = total customers
(4500 x 20%) = 900 + (900 x 66%) = 600 = 1500 customers

total customers x average sale x transactions per annum = turnover
1500 x 200 x 2 = $600,000 turnover

lead generation up by 10%
conversion up 20 to 25%
retention up 66% to 70%
average sale up 10%
one in 10 customers come back one more time

(leads x conversion %) + retained customers = total customers
4950 x 25% = 1238 + 1238 x 70% = 867 = 2105 customers

total customers x average sale x transactions per annum = turnover
2105 x $220 x 2.2 = $1,018,820 turnover

Analyse Business

Using the information below you can review your current state and then work towards increasing your turnover through customers, average sale and number of transactions.

Business at Present Business in the Future
View the Customer Marketing Overview report under the customer menu.
That report shows you the following:

Leads =
Conversion % =
Retention Ration% =
Average Sale $ =
Frequency of Purchase =
Turnover =

Fill in the following fields to determine where you want your business to be and the strategies you have in place to get there.

What you would like your turnover to be $……………………………………….
How many sales per week are needed $……………………………………………
At current conversion rate, how many leads are needed ………………….
If you increase average sales by 10%,
how many sales are needed per week ………………………………………………
How many lead generation strategies do you have ……………………………
Number of ways to retain customers ………………………………………………..
Number of ways to increase average sales…………………………………………
Number of ways to increase frequency of sales ………………………………..

Now that you have an understanding about the 5% factor, in the next blog we will look at ways to Increase Number of Customers, the follow blog will then look at, Increase average number of transactions per year and the final blog will look at Increasing the average sale dollar.

If you can’t wait until the next blog, you can take a look at few suggestions here