Business/Profit Multipliers

There is a technique called Business/Profit Multipliers that you can use when dealing with a reality of big increases required, or requested by your higher management team.

Let’s assume that the objective is a 25% increase in sales. This number, looked at by itself, is somewhat scary.

Here is how you may want to approach it. Let’s first look at the present scenario:

Traffic: 1000 / week
Conversion: 25%
Average Units / Customer: 2
Average Price: $25
Average $ / Customer: $50
Weekly Sales: 250 x 50 = $12,500

Now instead of talking about a 25% increase, let’s look at increasing each one of our operating variables by only 10%:

Traffic: 1100 / week
Conversion: 27.5%
Average Units / Customer: 2.2
Average Price: $27.5
Average $ / Customer: $60.5

Weekly Sales Become:
Customer # Converted: 1100 x 0.275=302.5
Average Ticket: 2.2×27.5=60.5
Weekly Sales = 302.5×60.5 = $18,301.25
% Increase: (18,301.25-12,500) / 12,500=46.41

In fact, for the above scenario, to achieve a 25% increase overall, you only need to increase your operating variables by 5.5%.

Much easier to sell it to your subordinates and get a buy-in, isn’t it?

Many more practical and actionable techniques, methods and insight in the Ultimate Retail Success ToolKit.


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