The fact that you have great products or services does not mean your business will automatically draw in more customers. It won’t automatically bring an ongoing stream of revenue for your company. There must be efforts to get customers to purchase and use the products or services you offer. Yet, many entrepreneurs fail to appreciate the importance of their actions. They are content to wait and see that nothing happens to their services or products. Then, in the end, the company is a failure because no one was aware of their services or products or believed that their services or products were of the highest quality.
Six variables directly impact the profit for your company. The influence of these variables will significantly impact the number of profits you earn for your company.
Leads (also referred to as prospects) are potential customers your company can attract and connect with. They could be someone who contacts your employees, you or office, or who visit your stores, browse your sites, or get they are introduced to you by someone. They are all qualified to become potential customers. The greater the number of leads you have, the greater are the likelihood that they might actually purchase one of your products or avail of your services and even refer them to prospective customers.
2. Conversion Rate
Conversion Rate is the percentage of how many leads are actually converted to becoming customers. Businesses that make money are those that are able to utilize various strategies and techniques to allow them to achieve the best possible conversion rates.
Leads Conversion Rate = Conversion Rate of Customers
This means that if you would like to attract more customers buying your products or subscribe to the services you offer, you need to either increase your Leads, or increase your Conversion Rate, or both.
3. Average Dollar Purchase
“Average dollar purchase” is the sum of money that a customer spends when they visit your business—the amount they pay to purchase your products or services. In any industry, there is a wide range of products that have different costs attached to them. Inviting customers to buy the more expensive items or to use services that are more expensive will increase your profits.
The referral to your products and services may come from current customers, leads, or any other source. Happy and satisfied customers typically will be happy to refer your services and products to their friends and colleagues.
5. Repetition of Purchase
One of the mistakes that businesses make is to believe that every customer is likely to return for frequent purchases due to being happy with the purchase of their items or services. This is usually not the reality. It is essential to make efforts to build loyalty among your clients.
6. Net Profit Margin
The variables 1 through 5 can affect the amount of revenue from sales you’ll earn. But this variable will also directly affect the final net profits.
Sales Revenue x Net Profit Margin = Net Profits.