Profit increase

At the time, this formula is very strongly influenced my perception of doing business. It is suitable for any niche and demonstrates how to improve the company's performance. After realizing her personally, I immediately began to see the complete picture of increasing profit, regardless of the industry.

This formula is made up of five main components:

- Margin (ie net profit as you put it in his pocket after each transaction)
- Incoming traffic to the site
- Conversion (how many people came to your site make a purchase)
- Re-sale (how many times the same customer orders your services)
- The average check (how much the average person spends one ordering your products or services)

The total profit of your business is built as follows:

• conversion of the incoming traffic • repeat sales • average ticket • Margin

Let's imagine it in concrete figures. Let's say you have an online store, with the attendance of 20,000 visitors per month. Average bill 1,500 rubles, the conversion of 2%. The average monthly visitor buys from you once. With every sale you put it in his pocket 30%.

Total your income will be:

20000 • 0,02 • 1 • 1500 • 0.30 = 180 thousand rubles

Sales volume (all the same thing but without the margin):

20000 • 0,02 • 1 • 1500 = 600 thousand rubles

How can actually increase profits? It's very simple - we must work to increase each of the coefficients. However, there is a caveat.

Practice shows that most entrepreneurs are somehow trying to increase only one - incoming traffic. While spending serious money on advertising. But if you look closely at the formula it is clear that much more effective to work on conversion, average check and repeat sales. They are demanding lower costs and increase your profits significantly.

Let's look at the same example. Let's increase the conversion of only 1%.

Profit: 20000 • 0,02 • 1 • 1500 • 0.30 = 270,000

Sales: 20000 • 0,03 • • 1500 = 1 900 000

S increase the average 200 rubles.

Profit: 20000 • 0.03 • 1 • 1700 • 0.30 = 306,000

Sales volume: 20,000 • 0.03 • 1 • 1700 = 1 million. 20 thousand.

That is, increasing the conversion rate at 1% and increasing average check 200 rubles (just 13%), you increase your profits by 70%. Without any advertising costs.

Now imagine that you have increased the number of repeat sales per visitor from one to two. I think not difficult to calculate how much total profit increases.

In short, before you spend money to attract traffic, think about how you can increase other factors.