To Make Sure You Get the MostOut of Your Learning ...IKNOW
Tip #1: Know Your #‘s by product• Example: Thoms 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: Thoms Birdhouses• Gross Margin means…• Birdhouse Gross Profit as $• Birdhouse Gross Profit as %• Margin is important, but you cant take it toBank
KNOW your Math….The “Math” ofDiscounting and of Price Increases....40% gross margin10% price change = 25%profit changeWith a 10% Discount, what increase incustomers do you need to break even?60 60 60403050020406080100120Base 10% Discount 10% IncreaseProfitVariable/Direct Costs33%1
Tip #1: Know Your #s…by product• Exercise on 1 of your products• What is the SALE Price?• What is cost of labor?• What is the cost of material?• Any other costs to produce?• S-COGS=GP• What is your GP$?• GP as %?
Gross Profit 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 yourwhole 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 yourwhole 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 fixedAND a goal of profit• Example: Thoms Birdhouses Business:– Fixed Expenses are $1000– And GP% is______________– What is Break Even in Sales?
Marketing Campaign Break-Even AnalysisIs This Show worth itRegistration $______Labor $______Incidentals $______Total Cost $ ______divided byAverage Profit ($) per Customer $ ______equalsNumber of Customers Required ______divided byMeasured Conversion Rate ______equalsNumber of Leads Required ______What is the probability that the campaign willgenerate the required number of Leads?
Marketing Campaign Break-Even AnalysisIs This Show worth itRegistration $ 500Labor $ 1,000Incidentals $ 300Total Cost $ 1,800divided byAverage Profit ($) per Customer $ 150Average Sale is $500 with 30% PM=$150equalsNumber of Customers Required 12divided byMeasured Conversion Rate 20%equalsNumber of Leads Required 60What is the probability that the campaign will
Profitable Marketing: WHERE toinvest?• The basis of business is investment• If you could invest 1 hour and $10 into Xor Y……• Invest $100 Savings in Bank X or Y….• Invest $100 into Advertising X or Y….• Invest $1000 into Brochure X or WebsiteY….
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 Thoms Birdhouses
Test AdvertisementTest Advertisement AA BBAdvertisement CostAdvertisement Cost $1,000$1,000 $1,000$1,000No. Of LeadsNo. Of Leads 1,0001,000 100100Conversion/SalesConversion/Sales 100100 5050Ave $$$ SaleAve $$$ Sale $500$500 $1,000$1,000Ave $$$ ProfitAve $$$ Profit $200$200 $200$200Lifetime ValueLifetime Value $5,000$5,000 $10,000$10,000ReferralsReferrals 1010 22
Dogs and Cows: Your Product Mix• A Product Mix simple means…..• Think about your product MIX and whatyou are offering learn from the big boys• All Products Great and Small….Impulse• Dogs are….• Cows are…..• The Pin Ball Machine principle: Always aDog, Always a Cow
Tip #4: Production Goals• Know in advance how much you shouldmake• Forecasting Demand• Keep a History: What sells well, whatdoesn’t sell well.• Simple Turn Tracking Sheet• What turns the fastest? Make more• What turns slowest? Make less
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
Who wants more…..Number of LeadsxConversion Rate=Customersx# of TransactionsxAvg. $$$ Sale=RevenueXMargin=$ Profit $6
With just a 10% increase...Number of LeadsXConversion Rate=CustomersXNo of TransactionsXAvg. $$$ Sale=RevenueXProfit Margins=$ Profits $4,000X25%=1,000X2X$100=$200,000X25%=$50,0004,400X27.5%=1,210X2.2X$110=$292,820X27.5%=$80,525
A 10% increase in each of the 5 areas willresult in a 61% increase in Profits?Do it 2 years in a row and your profits willincrease by 159% compared to baseline?Number of LeadsxConversion Rate=Customersx# of TransactionsxAvg. $$$ Sale=RevenuexProfit Margins=$ Profits $Did You Know That...