It's Not About Sales…But Profits

Coach Thom Finn

It's Not About Sales…But Profits

Coach Thom Finn

To Make Sure You Get the Most Out of Your Learning ...

I KNOW

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

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

KNOW your Math….The “Math” of Discounting and of Price Increases....

40% gross margin10% price change = 25% profit changeWith a 10% Discount, what increase in customers do you need to break even?

60 60 60

4030

50

0

20

40

60

80

100

120

Base 10% Discount 10% Increase

Profit

Variable/Direct Costs

33%

1

Know Your Price Increase Math…

MarginPrice

IncreaseProfit

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

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 %?

Gross Profit per Unit…

Gross Profit vs. Net Profit…

What’s the unit break-even for this company?What’s the unit break-even for this company?

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

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______

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?

Marketing Campaign Break-Even AnalysisIs 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?

Marketing Campaign Break-Even AnalysisIs This Show worth it

Registration $ 500Labor $ 1,000Incidentals $ 300Total Cost $ 1,800divided by

Average Profit ($) per Customer $ 150Average Sale is $500 with 30% PM=$150equals

Number of Customers Required 12divided by

Measured Conversion Rate 20%equals

Number of Leads Required 60

What is the probability that the campaign will generate the required number of Leads?

Profitable Marketing ...

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….

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

Tip #4: Return on Investment (ROI)*

• ROI Math• ROI analysis example Thom's Birdhouses

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

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

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

…thisis

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

………………………………………

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

It's Not About Sales…But Profits

Coach Thom Finn

Who wants more…..

Number of Leadsx

Conversion Rate=

Customersx

# of Transactionsx

Avg. $$$ Sale=

RevenueX

Margin =

$ Profit $

6

With just a 10% increase...Number of Leads

XConversion Rate

=Customers

XNo of Transactions

XAvg. $$$ Sale

=Revenue

XProfit Margins

=$ Profits $

4,000 X25% =1,000 X 2 X $100 =$200,000 X 25% =$50,000

4,400 X27.5% =1,210 X 2.2 X $110 =$292,820 X 27.5% =$80,525

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 Leadsx

Conversion Rate=

Customersx

# of Transactionsx

Avg. $$$ Sale=

Revenuex

Profit Margins =

$ Profits $

Did You Know That...