Fun with Numbers, Part 3

Yesterday I wrote about reducing the cost per lead for your paint contracting business. Today we are going to look at increasing the average sale and the impact that can have on your advertising budget.

Again, we are assuming the following:
You want to increase revenues by $100,000
Your closing rate is 33%
Your average sale is $3,000
Your average lead cost is $100
Which means you must sell 33.3 more jobs, generate 100 more leads, and spend $10,000 more on advertising

What if you could increase the average sale to $3,300—a 10% increase? This would reduce the number of jobs sold to 30.3, the number of additional leads to 91, and the advertising budget to $9,090. That’s a decrease of almost 10% simply by increasing the average sale.

Increasing the average sale can have an impact throughout the business. Fewer jobs need to be sold (which can reduce scheduling and administrative issues), fewer leads are required, and the advertising budget might be reduced. Small improvements can have a widespread impact.

A simple spreadsheet can be constructed to look at different scenarios. This will allow you to see how changing one number will impact the others. (Or you can purchase a pre-programmed Excel spreadsheet for $10. The spreadsheet will allow you to track and analyze your monthly advertising and sales statistics, as well as run various scenarios regarding the numbers discussed in this series.)

One way to increase your average sale is to increase your prices. Of course, this may have other repercussions and needs to be considered carefully. Another way to increase the average sale is to offer upgrades to more durable products.

Again, this isn’t about how to increase the average sale. There are many ways to accomplish that. But when we understand the numbers and how they can impact our business, we can make more informed decisions. We can decide on the best course of action to accomplish our goals.

As with the other numbers being discussed in this series, increasing the average sale can have a ripple effect. Understanding those effects is the best way to manage your business by the numbers.

© BEP Enterprises Incorporated 2008