5 Ways to Increase Business Profits

Finding ways to increase profits is always on the minds of most business owners. ActionCOACH RGV has worked with countless entrepreneurs to identify strategies for improving profit performance, including sharing insights on five important and often overlooked ways to increase your bottom line.

Following the ActionCOACH 5 Ways Model, companies can potentially grow their business and compound profit by up to 61% with just a 10% increase in specific areas to improve cash flow and increase revenue.

The ‘Standard Profit Model’ will look at profit development from three variables including sales, expenses and profits (SALES - EXPENSES = PROFITS). When using this approach, a business will look at increasing sales or decreasing expenses for improved profitability.

This model misses opportunities to create significant gain by overlooking five valuable inputs. The ‘ActionCOACH 5 Ways Profit Model’ breaks sales variables into five distinct categories. These variables can be worked on individually using the ‘Divide to Multiply’ principle to leverage profits on the bottom line.

The ‘5 Ways’ model is identifiable using five profit-generating areas including:

  • Lead Generation
  • Conversion Rate
  • Average Number of Transactions
  • Average Sale
  • Profit Margins

As profit-generating equations, these five areas function by increasing sales and profits, and keeping expenses constant. Customers, revenue, and profit are seen as “outputs” (results) in this model, and changing outputs can be done by changing inputs.

The 5 Ways Model is valuable by virtue of its compounding effect, its ability to increase the number of leads, and the conversion rate, where one multiplies the other. Compounding formulas offer small improvements to each area, which creates improvement in a dramatic fashion.

Changing Inputs

In the 5 Ways Model, inputs are products that we put into our businesses. These inputs are:

Lead Generation

An effective sales and marketing system is tasked with generating leads, and is vital to identifying potential buyers, or prospects, which in turn are looked at as a touchstone of your business operation.

To learn which marketing strategies are yielding results, a ‘test and measure’ system is a crucial part of the evaluation process to identify where resources are best deployed.

Conversion Rate

Responses are not equal to results. A conversion rate signals the percentage of people who bought in contrast to those who could have bought. As an example, if ten people were to visit a store, and only three purchases were made, the conversion rate is 30% (3 out of 10).

It is in these instances where a sales team demonstrates its strength. A robust sales system signals lead generation efforts that are fruitful.

Number of Transactions

Repeat customers are a cost-effective way to increase profits. However, many business owners are under the false impression that once a customer, always a customer.

This idea is a myth that prevents business owners from providing effective strategies to promote customer retention and repeat business.

Average Sale

Consider the instances you’ve visited a business and have been asked if you’d like an upsell to a product, and consider the number of times you agreed to spend more than originally intended. The upsell and cross-sell of products that pose a value to a customer at the point of sale are a significant way to increase business revenue.

Profitability will increase dramatically with consistent upselling and cross-selling techniques.

Profit Margins

Margin is identifiable by the profit percentage of every sale, and it's critical to know profit margins assigned to each product or service sold. Profit margin ratio will compare profit to sales to indicate how well the business is managing overall finances, and is always displayed as a percentage.

The 5 Ways Model Works to Maximize

The five ways discussed are a sampling of variables that can be used to potentially grow your business and increase your company’s revenue. ActionCOACH RGV offers suggestions and solutions that drive businesses forward, and inspire the confidence to implement the strategies that work.

We provide unique business-building tools, approaches, strategies, and systems devised by a group of driven, energetic, and well-versed business coaches, industry leaders, and supporting team members.

Take the next step to ensure your business continues on an upward trajectory toward profitability. Sign up for Founder’s U TODAY!