This post is all about profit. If you are wanting to know how to put more money in the bank from your business then this is for you.
It’s amazing that 90% of business owners do not know the critical elements that go in to creating profit.
This post is will put you in the top 5% of business owners that truly understand profit. Once we know how profit is created we can then apply it to our own business and crush it!
Dictionary Definition: A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
The first step to profit is traffic. Traffic or leads are oxygen to any successful business. Knowing how to drive traffic to your business is a very valuable skill.
There are many courses devoted to this one subject. Just know that online traffic is not the only source of traffic you can get for your business. Here are some traffic sources to help get your traffic juices going.
- Media Buys
- Search Engine
- Web 2.0 PDF
- Press Release
- Blog Commenting
- Classified Ads
- Direct Mail
- Trade Show
- Joint Venture
Top Traffic Tip: Test and find out which sources of traffic give you the very best ROI. Double up what works and stop doing what doesn’t work.
2. Conversion Rate
Once you have lots of people coming to your website a percentage of them will likely buy something. The average online conversion rate is 1%. This means that for every 100 people who visit your website 1 person will buy.
Once you know your conversion rate you can set up some split tests and start increasing that percentage.
Improving your conversion rate is a great way to boost profits. If you set up a number of split tests that get your conversion rate to 2%, this alone will double your business. Here are some ways to improve your conversion rate.
- Split Testing
- Improve Sales Copy
- Sales Training
- Building Your Authority
- Target Better Keywords
- Stop/Fix What Isn’t Working
Top Conversion Tip: The fastest way to boost your profit is to optimize what is already working and fix or stop what isn’t.
3. Sale Amount
The third step in the 5 step profit formula is the actual amount of money each person gives you.
If you are not the actual product owner then there is not a lot you can do here, however if you are then here are some ways in which you can increase the average order size.
- Increase Prices
- Up Sell
- Down Sell
- Cross Sell
- Be Unique
Top Sales Tip: One of the best ways to increase the average order size is to target better quality prospects who are happy to pay a premium for quality solutions.
Next up is frequency. This is how many times people return to buy from you.
One of the biggest reasons businesses do not gorw as fast as they could is because business owners just focus the ‘One Time’ sale.
Bringing your customers back to buy again is one of the most profitable things you can do. Here is some ways you can increase your sales frequency.
- Have/Add a Recurring Product
- Make More Offers
- Create Another Product
Top Frequency Tip: You will see dramatic increases in your profit by adding a recurring component to your business.
The last point is all about margin. This is basically the difference between the products selling price and how much it cost you to sell the product.
Here are some ways in which you can increase your margin.
- Buy Better
- Change Supply
- Re-negotiate Your Supplier
- Joint Ventures
- Change Your Traffic Channel
- Switch To Digital Products
Top Margin Tip: All things being equal, just growing your business will increase your margin.
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