Four Ways To Increase Profit Model

I’m very conscious that wearing my accountants hat, I told you there were three ways to increase profit and when I pop on my marketing hat, I now say there are three ways to grow any business.

Let’s reconcile the two.

We know what matters for profit is contribution and fixed costs.

And we can take the logic of the Three Ways To Grow model and refocus it very simply.

If we stop thinking average sales value per transaction and start thinking average contribution per transaction and then also build in the fixed costs, we have a Four Ways To Increase Profit Model.

1.    More customers

2.    A higher contribution value per transaction

3.    More transactions per customer

These three together will create a bigger contribution

4.    Lower fixed costs

Equals more Profit

We now have a profit model which focuses on what we want to persuade customers to do and at the same time is in line with the accountants’ cost volume profit model.

This will form the basis for your own profit model, perhaps split into first transactions and subsequent transactions or the different lead sources you use to attract new customers.

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