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For most people, they would believe that you have to focus on getting more customers and increasing profits. But this is too general, too "big picture". You have to zoom out from the big picture and zoom into some specifics or details. You can't get "more customers", you can only get "more leads" and increase the "conversion rate" of those leads. You can't get "more profit", you can only increase the "transactions" of your current customers, boost the "average $ sale" and increase your "margin" (reduce your costs).
Can you see where we are going with this? This is a very POWERFUL way to look at it and changes the way that you focus and run your business. So this 5 step formula is LEADS x CONVERSION = customers x TRANSACTIONS x AV. $ SALE = turnover x MARGIN = profit.
Eg. 1000 Leads x 1% Conversion = 10 customers x 5 Transactions x $30 Av. $ Sale = $1500 turnover x 80% Margin = $1200 profit.
The only way to determine the above figures for your business is to TEST and MEASURE. You're probably thinking what a pain in the arse, but I can assure you, once you start doing this you will NEVER go back. So, work out how many unique visitors go to your site, how many buy from you, how many times does the average customer make a purchase from you (over the course of their time as your customer), what's the average $ sale, and what's your overall margin.
So, in the example above, you can determine that for every 1000 visitors to your site you will make $1200 over the "lifetime" of those customers and each customer is worth $120 to you. What if you were able to increase the conversion to 2%. All of a sudden you have $2400 cash in your pocket. What if you also increased the number of transactions to 7? Now you have $3360. What if you were able to make small improvements in all 5 areas? Can you see how exciting this is? You can make a HUGE difference to your bottom line just by making a few small incremental changes in those five areas.
You can't control how many customers you get or how much profit you make. But you can be absolutely laser-focussed on the 5 parts of your business that will give you consistent, predictable results.
Category: Home Based Business5 Parts Of A Profit-Making Online Home Business was written by:Author:Andrew JonesAdded: Sat, 12 Aug 2006 03:02:02 -0400 This Article Has Been Read 395 times View all Andrew Jones's articlesAbout the Author: Andrew Jones has been a business owner for the past 10 years, and is now an Internet Marketer and Plug-In Profit Site owner. Discover the best way to earn extra money online. |
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