Almost all small businesses worry about sales levels; indeed all large businesses worry about sales levels as well, but as I work with small businesses lets stick to them.
There is a way to be more certain about sales levels and that is through the use of simple mathematics. Let’s look at how mathematics can help small businesses.
As a small business owner, you will know how much profit you need to make each month in order to pay the bills. Now lets work backwards:
- From your profit margin, you can then calculate how much turnover you need to generate.
- From your turnover you can work out how many sales you need to make, to current or new clients
- From the sales figure you can see how many prospects you need to talk to about how you can help them.
- From your prospects figures you should then be able to see how much resource needs to be committed to generating interest in your services.
- The amount of traffic to your website
- The number of outbound sales calls
- The level of interaction on your social media platforms
Let’s calculate the figures for an example company, which sells cufflinks to retailers:
- Money needed each month: £3,000
- Profit margin: 60%, so the company needs to generate £5,000 in sales
- At £50 a pair (they’re nice cufflinks), that’s 100 units per month
- Every other retailer they talk to buys, on average, 10 pairs of cufflinks, and they have a good number of retailers who buy each month. 60% of sales come from repeat customers, so this takes care of sales for 60 units per month.
- That leaves a further 40 units to sell, with a close rate of 50%, so they need to talk to 8 different retailers every month.
- As their website isn’t an e-commerce site, retailers have to call to discuss their needs. On average 50 people look at the site for every person to pick up the phone so they need 400 visits per month
- At the moment the website gets 250 unique visits per month
From here you can see what work needs to be done: the company needs to develop another 150, or more, unique visitors to their website.
If you can do these calculations for your business, that’s great and I hope this helps. If you can’t please get in touch and I will be happy to work with you on developing the numbers