In business there are no magic bullets, but this idea is so powerful it certainly feels like magic. I ran into an old friend yesterday, and it reminded me of a series of seminars I ran a few years ago that contained a section on how to increase profits. Especially when times are tough, it's great to be able to break things down into some simple rules that allow you to know where to focus, so
I'll share this very simple but powerful idea with you now. Gross Profit is calculated on an "averaged basis" as: (Total number of clients x Average number of visits per year x Average sale x Average margin) Let's say I have a small grocery store (simplified numbers for effect) with 200 clients who visit once a month. On average they spend $100 and I have a 15% margin on the items sold. From the above example ...
Gross profit per year = 200 * 12 * $100 * 15% =
$36k Now if I asked you to double your profits this year, you might look at me sideways and say that it's not possible. That's because many people think that to double your profits you need to double your sales ... It seems obvious from the calculation above? But the truth is that the compounding effect of changes in each of these numbers, even small ones, can have a dramatic impact on the bottom line.
So if we are going to double our profits, we could do it like this...Grow the number of customers by 20% There are lots of ways to find new clients. In my case we start talking to our clients and ask them to "bring along a friend". Basically I encourage word of month promotion and 1 in 5 bring a new regular client?
Now I have 240 clients.Get them to come back more often When we review our sales statistics we find that people are buying once a month. Due to our sales cycle we have people buying on the same day (eg 15th) each month. By changing it to a 4 week cycle we could get one more sale per year.
Now our customers are purchasing 13 times a year.Spend more each time (15%) Our sales promotion now focuses on getting a little more in each shopping basket. We look at impulse purchases and slightly higher priced options. For example one pot of premium honey a month over winter purchased for its medicinal benefits would provide the required $15 increase.
Now the average sale is $115.Increase margin to 20% This might look after itself, as the higher value options also have a higher margin. However we look at our purchasing and got an improved margin by buying in greater bulk, twisting suppliers' arms and reducing shipping and breakage costs.
Now my numbers look likeNew Gross Profit = 240 * 13 * $115 * 20% =
$72kProfit Doubled Ok, Ok ... I know this is over simplified, but I hope you can see that if you focus in these areas of your business, due to the compounding effect, a small increase in each can yield incredible improvements to the bottom line.
The key to guaranteed success is to 'Keep it Simple' and focus on the cumulative effect of continuous improvement. Your thoughts? Have you seen this work in your business? Am I talking crap ... let me know below!
In business there are no magic bullets, but this idea is so powerful it certainly feels like magic. I ran into an old friend yesterday, and it reminded me of a series of seminars I ran a few years ago that contained a section on how to increase profits. Especially when times are tough, it's great to be able to break things down into some simple rules that allow you to know where to focus, so I'll share this very simple but powerful idea with you now. Gross Profit is calculated on an "averaged basis" as: (Total number of clients x Average number of visits per year x Average sale x Average margin) Let's say I have a small grocery store (simplified numbers for effect) with 200 clients who visit once a month. On average they spend $100 and I have a 15% margin on the items sold. From the above example ... Gross profit per year = 200 * 12 * $100 * 15% = $36k Now if I asked you to double your profits this year, you might look at me sideways and say that it's not possible. That's because many people think that to double your profits you need to double your sales ... It seems obvious from the calculation above? But the truth is that the compounding effect of changes in each of these numbers, even small ones, can have a dramatic impact on the bottom line. So if we are going to double our profits, we could do it like this...Grow the number of customers by 20% There are lots of ways to find new clients. In my case we start talking to our clients and ask them to "bring along a friend". Basically I encourage word of month promotion and 1 in 5 bring a new regular client? Now I have 240 clients.Get them to come back more often When we review our sales statistics we find that people are buying once a month. Due to our sales cycle we have people buying on the same day (eg 15th) each month. By changing it to a 4 week cycle we could get one more sale per year. Now our customers are purchasing 13 times a year.Spend more each time (15%) Our sales promotion now focuses on getting a little more in each shopping basket. We look at impulse purchases and slightly higher priced options. For example one pot of premium honey a month over winter purchased for its medicinal benefits would provide the required $15 increase. Now the average sale is $115.Increase margin to 20% This might look after itself, as the higher value options also have a higher margin. However we look at our purchasing and got an improved margin by buying in greater bulk, twisting suppliers' arms and reducing shipping and breakage costs. Now my numbers look likeNew Gross Profit = 240 * 13 * $115 * 20% = $72kProfit Doubled Ok, Ok ... I know this is over simplified, but I hope you can see that if you focus in these areas of your business, due to the compounding effect, a small increase in each can yield incredible improvements to the bottom line. The key to guaranteed success is to 'Keep it Simple' and focus on the cumulative effect of continuous improvement. Your thoughts? Have you seen this work in your business? Am I talking crap ... let me know below!
Photo by Brett Harkness I just wrote about why I love photograph albums, but the story got a little long so I've edited it. I guess the truth is we love the industry, the books and just as importantly, we love design. Queensberry's love and focus on design is a story all by itself. Let's face it, though, some albums suck ... Sorry but they do. The book is cheap and plasticky, and no consideration is given to what photos are included. A great album is so much more. I'm not trying to turn this into a shameless plug, and I know quality is subjective, but I believe we produce the world's finest albums. From a design perspective we are the "bride's advocate" and although it's a little overstated, our goal is for the bride to have an experience seeing her album for the first time that in some ways is better than the one she had on the day. What do I mean by that? You know what it's like ... she gets stressed ... there are lots of things she doesn't get to see and experience ... and of course on the day she doesn't see herself as others see her. It's hard to explain, but the experience of enjoying an album starts before you even open the cover ... It is a beautiful but understated book that piques a person's curiosity. A book whose design is in line with today's taste but equally comfortable with tomorrow's. The real experience, however, is in the pages of the book. The photographer starts by skilfully capturing the events of the day, the spirit of the people involved, the important details as they unfold. It's impossible to describe the total effect, you need to hold a book in your hands to know exactly what I am describing, but when it's done properly the signs are very obvious ... smiles, tears, laughter and people pointing dumb struck as they pore over their images. Here are a few examples (images and albums) by other photographers: - Harvest Colours - Red and White all over - Lyttleton Grunge