I’ve got revenue, but where is the profit?

Your Profit
Improvement Plan

Most people are taught that -

So if this were the formula for profit, what are the two ways you can increase your profit?

• Increase Sales or
• Reduce Expenses

Making more profit just isn’t a two dimensional formula. Making more sales (on products with low / no margins) will send you broke and blindly reducing expenses can find you cutting the very expenses that are make you money.

Few people are familiar with the real formula for profit (as we are never taught this in schools). This profit formula actually gives you 7 ways you can dramatically increase your profit and business value!

• Leads x Conversion = New Clients + Existing Clients = Total Clients x Retention x How
• Much x How Often = Revenue x Margin = Profit x Multiple = Value

7 ways to dramatically
Increase Your Profit

• 1Increase Leads
• 2Increase Conversion Rates
• 3Increase Retention Rates
• 4Increase How Much your customers spend with you
• 5Increase How Often your customers spend with you
• 6Increase your Profit Margin
• 7Increase your Business Sale Multiple

If you implement the
new profit formula,
you will -

• Get more customers
• Grow your revenue
• Boost your profits, and
• Increase your business value

The incredible
power of 10

If you were to work out your numbers using this equation and then focus on strategies to improve each key area then you would have a vastly different result.

Consider the numbers for an example marketing agency -

• 100 leads X
  50% conversion rate =
  50 new clients +
  275 existing clients =
  325 total clients X
  80% retention rate X
  $1,250 per project X
  2 projects per client =
  $650,000 of revenue X
  20% profit margin =
  $130,000 profit X
  3 x business sale multiple =
  $390,000 business valuation

If we were to make a 10% improvement on all areas then you would have a 43% increase in revenue. Let me explain…

• 110 leads X
  55% conversion rate =
  60.5 new clients +
  275 existing clients =
  335.5 total clients X
  88% retention rate X
  $1,375 per project X
  2.2 projects per client =
  $893,101 of revenue X
  22% profit margin =
  $196,482.22 profit X
  3.3 x business sale multiple =
  $648,391.33 business valuation

• A 37% increase in revenue.
• A51% increase in profit.
• A66% increase in business value.

Apply the same process 2 years in a row and you will experience a

• 89% increase in revenue.
• 129% increase in profit.
• 177% increase in business value.

That is the incredible power of 10.
Small changes to the numbers that matter most can make a radical impact to your revenue, profit and business value.