This is the first installment in a series of  business articles to help Boom! Magazine’s business partners, the advertisers who make publishing Boom! possible, grow their businesses with the help of Ed Gideon’s professional advice.

Conventional business looks at sales from the standpoint of three variables, namely sales, expenses and profits defined by the formula:  Sales – Expenses = Profits.  In this approach, each variable depends on the other, forcing businesses to look at either increasing sales or decreasing expenses in order to influence profitability. While this is not incorrect there is a more results-oriented view.

ActionCOACH moves away from this narrow view and breaks the sales variable into five separate components.  These variables can be worked individually and across the board to leverage profits on the bottom line.

To build a bigger or better business there are FIVE areas of Marketing and Sales that you should be concerned with. We call them the “5 Ways”, and massive results are possible by achieving only small improvements in each of these areas:

1. Number of Leads – how many potential clients do you attract?

2. Conversion Rate – how many leads do you convert into clients?

3. Average $ Sale – how much do they spend each time they buy?

4. Number of Transactions – how many times a year do your clients buy?

5. Margins – what is the gross or net margin your business achieves?

This simple but effective system of evaluating your business in terms of marketing and sales efficiency allows us to: 1). benchmark where we are right now, 2). select strategies and tactics from the ActionCOACH resources – strategies that have worked with thousands of businesses just like yours all over the world.

It may sound like a trick question: Can a business increase sales 10%, keep expenses constant and still see a 61% increase in profits?

Yes, if it looks at increasing the bottom-line via the 5Ways.

According to the “Five Ways,” all business is driven by the five key profit generating areas enumerated above. These areas are highlighted in the following equation:

Lead Generation(1) x Conversion Rate(2) = Number of Customers

Number of Customers x Average Dollar Sale(3) x Average Number of Transactions(4) = Revenues

Revenues x Profit Margins(5) = $ Profits

 

Check the Boom! Magazine website for Coach Ed’s detailed explanation of the Five Ways coming soon by clicking Topics from the Boom! home page.

 Ed Gideon can be contacted at 910.215.5784, email edgideon@actioncoach.com, web actioncoach.com/edwardgideon or follow his blog at edgideoncoach.wordpress.com