How to use this template
The template shows you how much more profit your business could generate if you improved your conversion rate by a given percentage. This may be the nudge you need to
enhance your closing skills. Your profit increase template helps you discover how much extra profit your business could make. It makes it easy to look at how minor improvements in your reach, conversion rate or repurchase rate can translate into increased profits. Depending on your net profit results, you may be able to justify entering a new market or launching a broader marketing campaign.
You can download the full article as an editable PDF template using this link: Coast Capital Profit Increase Template
1: Enter your number of potential customers
The first factor is your number of potential customers. If you reach more customers, you’ll probably generate more sales, and that translates into increased profits. If you have existing data, base your numbers on this information. If you’re in your first year of business, find out as much information as you can about the size of your target market and the distribution of potential customers among your competitors. Try to increase your number of leads or potential customers, for example, by encouraging referrals from your existing customers. You can use the profit increase template to see how expanding your pool of potential customers might affect your bottom line.
2: Enter your existing conversion rate
The second figure to enter in your profit increase template is your existing conversion rate. Your conversion rate is the percentage of customers you actually have from your total leads (or potential customers). Aim to increase the number of leads you convert into customers — for example, by offering your staff incentives for converting more leads (such as offering a commission). If you’ve realized that your conversion rate is below the average for your industry, you could experiment with various conversion rate improvements to find out how much more profit your business could potentially generate.
3: Enter the number of transactions per customer
The third number to add to your profit increase template is the number of transactions you have per customer. The template lets you examine how an increase in the number of
transactions per customer will increase your profit. There are plenty of ways you could aim to raise the number of transactions from each of your customers. For example, you might look at introducing a subscription service to lock customers into future purchases.
4: Enter the average value of each sale
What if you could boost the average value of each sale by five or 10 percent? The fourth figure to input is the average value of each sale you make. Look for areas of your business that you can improve to increase that average sale value. For example, you may find that it makes financial sense to invest in some sales training for your staff, to teach them the finer points of up-selling or cross-selling.
5: Enter your net profit percentage
Have you ever wondered what would happen if you could increase your net profit percentage by a few percentage points? By looking for cheaper suppliers you may be able to lower your overhead.
The fifth number to enter into your profit increase template is your net profit percentage. This figure comes from the ratio of your after-tax profits to your net sales. As you enter these five figures, the profit increase template will automatically compute your:
- Number of paying customers
- Total turnover
- Resulting net profit
6: Enter your desired improvement factors
As you enter your chosen improvement factors, look at how the resulting net profit improves compared to your current net profit. Experiment with different improvement factors to see their potential improvement to your profit. To isolate one improvement factor at a time, enter ‘0’ in the other improvement factor boxes. It’s always best to plan a long-term strategy for growth that can help you manage expansion without extending your business to the point where you run out of cash. Experiment with different scenarios to see how your profit can potentially increase by improving your reach, enhancing your conversion rate or gaining more repeat business.
The Stuff We Need To Say
This content is for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. You should consult your own professional advisor for specific financial, investment, and/or tax advice tailored to your needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
