Have you ever set yourself a bold and challenging sales target for next year, and then in the cold light of day looked at the required increase and got the sweats?
If you have, like me in the past, you would have “reconsidered” and scaled it back a bit to a more “realistic” level.
Well, if you have, then I’m here to tell you that you can break that challenging sales target into three components that, when looked at individually, may not look that hard at all!
What are these three ways to increase your sales without scaring the pants off you?
Before we get into that, let’s say your business turns over $600,000 in annual sales and has been at that level for some years. It goes up and down from year to year, but you can say that your average sales are $600,000 a year.
So, you are now determined to push your business to greater success, maybe because you’ve worked out that you need average sales of $900,000 a year to make a profit sufficient to meet your goals.
You start with an audacious target and set sales of $900,000 next year.
But then reality gets to you so you break it down into two years, $750,000 next year and $900,000 the year after that.
Feels better, right?
Then in working out what you need to do, you realise that’s an increase of $150,000 a year. Doesn’t sound too bad. That’s an increase of 25%. That means for every $100 you make in sales now, you need to find an extra $25 in new sales.
It starts to look scary again.
But here’s where we break it down into sizeable chunks.
You can’t eat a whole elephant in one sitting but if you chunked it into smaller pieces it becomes achievable.
In order to do this, we need to understand that our sales figure is made up of three things:-
- How many customers you have on average?
- How often they buy from you in the year?
- What is their average purchase each time they buy?
That sounds hard to understand so let’s take an example.
- Let’s say you have, on average 600 customers in a year.
- Let’s say they only buy once from you in the year.
- Let’s say that on average they spend $1,000 every time they buy.
So, your sales total is made up of:
600 customers multiplied by the 1 time they buy from you, multiplied by the $1,000 they spend on each buy.
That’s 600 x 1 x 1,000 = $600,000.
To get to your target, you would have to find another $150,000 to $300,000 in sales! Impossible!
Let’s look at that formula in more detail.
What would happen if you found just 10 more customers?
Your sales would then be 610 (ten more customers) x 1 x 1,000 = $610,000.
What happens if you also encourage only a quarter of them to buy twice a year? So there would be an average of about 457 people (3/4 of 610) who bought once a year and an average of about 153 people (1/4 of 610) who bought twice a year.
Your sales would then be:
457 (3/4 of your customers) x 1 x 1,000 = $457,000
153 (1/4 of your customers) x 2 x 1,000 = $306,000
But what would happen if you also increased your prices by just 5%?
Your sales would become:
457 x 1 x $1,050 = $479,850
153 x 2 x $1,050 = $321,300
Let’s just summarise that.
Increasing sales from $600,000 to $900,000 or even to $750,000 a year sounds very hard to do.
But does it sound too hard to:
- Find another 10, just 10 customers?
- Convince just a quarter of them, about 153 of the 610 people you have in your books, to buy more goods or services in the year?
- Increase prices overall by 5% from say a $1,000 product or service to a $1,050 one?
None of those increases sounds especially hard to achieve, do they?
And if you did achieve them, your sales that year would be $801,150 in the first year, nearly to your overall $900,000 target that seemed so scary to get!
Next year, all you need to do is increase sales by another $98,850.
Not so scary now!
If any of those increases sounds too hard to achieve, you can play around with the target increases in:
- The number of customers
- The number of times they buy from you
- The average amount they spend when they buy
until you arrive at the increases that you believe you can realistically achieve.
Let’s say in a different business because the owner is really close to his customers and knows that if they bought Product A every year, he can convince them to buy Product B as a complementary product so he believes he can increase the number of buys to 2 times a year for all of them.
His sales would be 600 original customers x 2 times a year x $1,000 = $1,200,000.
Presenting it in this way, you can look at your own business, your own relationship with your customers, your own product, and work out for yourself which of the three components you can increase, sometimes by only small amounts, to leverage to a huge increase in sales.
Once you “play” with your components’ targets, do remember that the numbers have a basis in the situation of your own business.
Specifically, if you are servicing your customers so they listen to you, if you are sending the right messages about your product, if you are targeting your target market by marketing to their needs, if you have prepared a focused marketing plan ready to swing into action, then you will find implementing the increases in any of those three components easier to do.
Before you go, don’t forget – if you haven’t already, sign up to get these valuable business growth strategies delivered directly to you to action every week.