Do you ever wonder how to increase sales revenue for your business?
Whether you manage a start-up, a small-to-medium business (SMB), or even a vast international enterprise; this article was written to help you.
More specifically, I wrote this article to help you visualize the simple mathematical formula that governs your company’s ability to generate income from sales, and by doing so, fatten your profit margins to help you take further control of your business.
So, in order to learn how to increase sales, first we need to understand the sales revenue formula…
What is the sales revenue formula?
Let’s get straight to the chase, the formula that governs your company’s sales revenue is shown in the first diagram below.
Now please take a few seconds to understand it thoroughly, visualize it in your mind, and comprehend how each of the variables (1-3) come together to impact your business’ income – it makes perfect sense right? Now, let’s see how to use it to increase sales.
And here’s an example for an imaginary business we’ll call ‘Company X’:
I have seen many an executive giggle at the sheer simplicity of the formula, whilst ultimately, acknowledging the profoundness of what they’re seeing.
For full transparency, I did not develop this formula, I learnt it from a brilliant marketer and business growth consultant called Jay Abraham – I highly recommend you begin the process of reading his books if you find this subject interesting.
How does the sales revenue formula work?
Generally, when I ask an individual how to increase sales over a particular period, they default to the same answer, which is ‘to acquire more clients’ – this is variable 1 of the above sales revenue formula – the answer is not incorrect, but as you may have now determined by yourself, acquiring new clients is very difficult, costly and time consuming.
If you choose to leverage the full formula (therefore also include variables 2 and 3), your business can achieve its goals with greater ease, efficiency and most importantly, speed.
Let’s look at the following examples below for our imaginary ‘Company X’; they wish to learn how to increase sales by 30% over a given period.
Rather than just focusing on variable 1 (trying to increase their number of clients by 30%), they choose to spread their efforts across all 3 variables as shown below:
It’s much easier to spread your desired rate of growth across all 3 variables rather than putting all of your time, resources and effort into any one variable alone. By diversifying your tactics, you will ultimately achieve your goals much quicker.
However, there’s another revelation, look what happens to Company X’s income when we skew the percentages across the 3 variables:
Did you notice that by skewing the percentages of each variable, that we get an exponential increase in the total income generated?
Imagine how you could increase sales within your business if your marketing and sales strategies incorporated all 3 variables?
Some practical tips to use the sales revenue formula for your business
During your next strategic meeting focused on revenue growth, I suggest the following format to generate and prioritize the best ideas to achieve your revenue growth goals.
Step 1
Put the sales revenue formula up on a screen or board for all to see with the question above ‘How to increase sales’:
Number of Clients x Average Sales Value x Frequency of Purchases = Total Income
Step 2
Under each variable, brainstorm ideas that could contribute to achieving that specific variable. For example, if we focused on variable 1 (Number of Clients) – if we want to increase our number of clients by a set percentage, what could we do? Some ideas may include:
- Allocate a larger budget to marketing
- Invest in training for our sales teams to improve their closing rates
- Create a referral incentive program so customers generate more leads etc
Do this exercise for each variable and list your ideas under each. Do not worry about the disqualifying or sequencing the validity of your ideas just yet, but rather use this time to think of as many ideas as possible for each variable.
Step 3
Once you feel you have enough ideas in place, draw a ‘Action Priority Matrix’ where effort is rated from low to high along the y-axis and impact is rated from low to high along the x-axis.
Step 4
Now, go through each idea, and using the action priority matrix, gauge your ideas by their effort vs impact. Once finished, you can have your team prioritize their efforts around the ideas that will deliver the most impact for the least effort.
Bonus Step
After working with many business leaders, I have observed that many do an inadequate job of A) defining their company’s values and beliefs, and then B) subsequently not training their employees sufficiently on them.
A rising tide raises all boats, and if you would like to add another significant bump to your top-line, I highly suggest that you read this short article aptly labelled ‘Driving sales effectively with company values’
Now it’s up to you!
Still wondering how to increase sales? I hope this information was succinct and powerful, and that you are now able to apply the sales revenue formula to transform your ability to generate income for your business.
I caution that any ideas generated and chosen to be implemented by your team be given thorough planning, and consistent effort to see them through to fruition.
If you have any questions about the sales revenue formula or how to increase sales for your business, please do not hesitate to get in touch.
End.
