Step 1 - PROFIT
It’s no surprise that sales are an essential metric for business improvement and growth. After all, sales (or revenue) drives profitability. It’s also a key measure we look at as business advisors to assess your business health.
When creating a strategy to increase sales, you need to determine if you’d like to drive this by:
Increasing the number of customers
Increasing the size of transactions per customer (such as your price per product or service)
Increasing the number of transactions per customer
Increase retention rate
Increasing leads
Increasing conversions
Improving or automating processes as well as investing in additional resources, tools and trainging can also improve and impact sales outputs.
Increasing your gross margin
Your gross margin is your profit after your cost of goods (or COGS) are subtracted, such as materials, labor or distribution costs. Gross margin is an important metric to measure and monitor, and it’s one of the key areas we review during business advisory check-ins to assess profitability. Generally, the higher your gross margin, the better – and more profitable – your business is.
When creating a business strategy to lift your gross margin, it’s important to understand what profits you're making per customer as well as what overheads and costs are associated. It’s also important to understand what costs are fixed vs variable.
Here, reporting and insights are key. Working with your accountant or business advisor, you can uncover opportunities to reduce operating costs and costs per service or product.
Increase profit
Your profitability underpins your business health and your ability to grow. Afterall, without it, your business doesn’t exist.
There are many factors that can influence your profits, including pricing, fixed costs and even your team’s productivity. To increase profit, it’s important to look at what you’re making for each sale (or customer) after allocating fixed overheads.
As you can imagine, to get true insights you need the full picture of costs. To get this, your records – receipts, accounts and overall accounting data – must be up to date. Reports focused on revenue, gross profit and fixed overheads will also provide insight into profitability.
If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
mcnamaraandco.au/contact
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com
