3. To Make Sure You Get the Most
Out of Your Learning ...
I
KNOW
4. Tip #1: Know Your #‘s by product
• Example: Thom's Birdhouses
• Know Revenues/Sales/Income
• “ “ Cost of Goods Sold/Indirect Labor,
• Know Gross Profit
• Know Fixed Expenses
• Know Net Income
5. Tip #1: Know Your #‘s by product
• Example: Thom's Birdhouses
• Gross Margin means…
• Birdhouse Gross Profit as $
• Birdhouse Gross Profit as %
• Margin is important, but you can't take it to
Bank
6. KNOW your Math….The “Math” of
Discounting and of Price Increases....
40% gross margin
10% price change = 25%
profit change
With a 10% Discount, what increase in
customers do you need to break even?
60 60 60
40
30
50
0
20
40
60
80
100
120
Base 10% Discount 10% Increase
Profit
Variable/Direct Costs
33%
1
7. Know Your Price Increase
Math…
Margin
Price
Increase
Profit
Increase
Decrease in
Customers
to Break
Even
20% 10% 50% 33%
40% 10% 25% 20%
40% 20% 50% 33%
60% 10% 17% 14%
80% 10% 13% 11%
1
8. Tip #1: Know Your #'s…by product
• Exercise on 1 of your products
• What is the SALE Price?
• What is cost of labor?
• What is the cost of material?
• Any other costs to produce?
• S-COGS=GP
• What is your GP$?
• GP as %?
10. Gross Profit vs. Net Profit…
What’s the unit break-even for this company?What’s the unit break-even for this company?
11. Tip #2: Know Your #s…for your
whole business
• TOTAL Gross Profit
• FIXED Expenses are….
• Gross Profit-Fixed =NET Income
• What are Thom’s Fixed?
• What was his GP by product?
• So GP by unit x______= Total GP
• So Thom’s Net Income =GP-Fixed
12. Tip #2: Know Your #s…for your
whole business
• Exercise on typical month
• Total Sales were_____
• Your Gross Profit % is____
• So your Gross Profit $ is____
• What are you typical fixed?______
• So Net Income is GP-Fixed or______
13. Tip #3: Break Even
• Enough Gross Profit to cover all fixed
• Break Even Enough Gross to cover fixed
AND a goal of profit
• Example: Thom's Birdhouses Business:
– Fixed Expenses are $1000
– And GP% is______________
– What is Break Even in Sales?
14. Marketing Campaign Break-Even Analysis
Is This Show worth it
Registration $______
Labor $______
Incidentals $______
Total Cost $ ______
divided by
Average Profit ($) per Customer $ ______
equals
Number of Customers Required ______
divided by
Measured Conversion Rate ______
equals
Number of Leads Required ______
What is the probability that the campaign will
generate the required number of Leads?
15. Marketing Campaign Break-Even Analysis
Is This Show worth it
Registration $ 500
Labor $ 1,000
Incidentals $ 300
Total Cost $ 1,800
divided by
Average Profit ($) per Customer $ 150
Average Sale is $500 with 30% PM=$150
equals
Number of Customers Required 12
divided by
Measured Conversion Rate 20%
equals
Number of Leads Required 60
What is the probability that the campaign will
17. Profitable Marketing: WHERE to
invest?
• The basis of business is investment
• If you could invest 1 hour and $10 into X
or Y……
• Invest $100 Savings in Bank X or Y….
• Invest $100 into Advertising X or Y….
• Invest $1000 into Brochure X or Website
Y….
18. Tip #3: Break Even*
• Break Even on ANYTHING
• Break Even on advertising
• Break Even on machinery
• Break Even on Team
• Break Even Analysis BEFORE,
• Return on Investment After
19. Tip #4: Return on Investment (ROI)*
• ROI Math
• ROI analysis example Thom's Birdhouses
20. Test AdvertisementTest Advertisement AA BB
Advertisement CostAdvertisement Cost $1,000$1,000 $1,000$1,000
No. Of LeadsNo. Of Leads 1,0001,000 100100
Conversion/SalesConversion/Sales 100100 5050
Ave $$$ SaleAve $$$ Sale $500$500 $1,000$1,000
Ave $$$ ProfitAve $$$ Profit $200$200 $200$200
Lifetime ValueLifetime Value $5,000$5,000 $10,000$10,000
ReferralsReferrals 1010 22
21. Dogs and Cows: Your Product Mix
• A Product Mix simple means…..
• Think about your product MIX and what
you are offering learn from the big boys
• All Products Great and Small….Impulse
• Dogs are….
• Cows are…..
• The Pin Ball Machine principle: Always a
Dog, Always a Cow
22. Tip #4: Production Goals
• Know in advance how much you should
make
• Forecasting Demand
• Keep a History: What sells well, what
doesn’t sell well.
• Simple Turn Tracking Sheet
• What turns the fastest? Make more
• What turns slowest? Make less
24. Tip #4: Production Goals
• Restocking Levels
• The Real Damage of Empty Shelves
• Staying stocked looks better more sales
• How to Stock if you are tight on Cash-
Dollar General Solution
……………………………………………thisis a white text box
………………………………………
25. What to do from here…..
• Start from the top of the list.
• Work this list in order,
– Know your numbers, etc.
• Questions and Discussion….
• Blue Sheets for Hand Outs
27. Who wants more…..
Number of Leads
x
Conversion Rate
=
Customers
x
# of Transactions
x
Avg. $$$ Sale
=
Revenue
X
Margin
=
$ Profit $
6
28. With just a 10% increase...
Number of Leads
X
Conversion Rate
=
Customers
X
No of Transactions
X
Avg. $$$ Sale
=
Revenue
X
Profit Margins
=
$ Profits $
4,000
X
25%
=
1,000
X
2
X
$100
=
$200,000
X
25%
=
$50,000
4,400
X
27.5%
=
1,210
X
2.2
X
$110
=
$292,820
X
27.5%
=
$80,525
29. A 10% increase in each of the 5 areas will
result in a 61% increase in Profits?
Do it 2 years in a row and your profits will
increase by 159% compared to baseline?
Number of Leads
x
Conversion Rate
=
Customers
x
# of Transactions
x
Avg. $$$ Sale
=
Revenue
x
Profit Margins
=
$ Profits $
Did You Know That...
Hinweis der Redaktion
Anyone with teenage kids … experts at this … Yeah I Know Mum … When older do it a little more politely … cross arms and say it to yourself … KILLS Learning … Get agreement everyone will treat today as a totally new experience … Introduce ISN’T THAT INTERESTING … ? Total 2 Mins
Client felt they were in a price competitive environment. Felt that they had to come in low on job bids. Took some jobs that generated no profit.
Do you think the chiropractor would have continued spending this money if they had done the Break-Even analysis?
Do you think the chiropractor would have continued spending this money if they had done the Break-Even analysis?
Took up snowboarding 3 years ago. Went to local ski shop – walked out with board, boots and bindings. 17 year old sales person wasn’t trained to let me know that, as a new snowboarder, there were a few items I might consider. Helmet, writs guards, binding tool and lock. Could have increased the sale by 10 – 20%.
Talk about the priority for review: Margins Conversion Rate Avg $ Sale # Transactions Lead Generation
Father and son cleaning business. Asked what their Conversion Rate was. Son said about 80%. We said, isn’t that interesting. Father took out log book – got 9 out of 20 of last jobs. That’s 45%. We said that’s great – we can improve 45%. We actually got their CR up to about 70% on average. This, combined with a price increase, tripled their revenue in a matter of months.
