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Categories: Sales Funnel

From time to time, I always like to sit down and review my business to find ways to increase the profit. The process I went through is based on the fundamental so it is applicable to both online and offline businesses.

Increase Revenue Formula

Formula to Increase Sales Revenue

Before we start tweaking bits and pieces, we will need to know the formula to increase sales revenue for our business so that we can drill down to each of the component.

Leads x Conversion Rate x Product Price x Number of Sales = Sales Revenue

As we can see from the formula above, it is favorable to have more leads, higher conversion rate, higher dollar spent and more number of purchases to bump the sales revenue. We can now delve into each component and find out various ways to optimize them.

Leads

The first thing that we can do is to generate more leads to increase the sales. In an online business, this could translate to more targeted visitors or more subscribers. The more targeted visitors we have, the more sales revenue we can generate if the rest of the variables maintain unchanged. This is something to do with traffic generation techniques and we will just need to choose our preferred techniques and scale up the traffic.

You have a choice when comes to traffic generation. You can either pay for traffic, spend time yourself to drive traffic or outsource to other people to handle with a fee. Initially you may tend to do everything by yourself if you are tight on budget. However, do put your thinking hat as a business owner (not employee).

If you can outsource a task at a cheaper rate than yourself with good quality, it might be a way to go while you can save yourself some time to focus on other tasks.

Conversion Rate

Depending on your business nature, the conversion rate varies. If you are running an offline coaching workshop, the conversion rate is the sign up rate during the preview (i.e. pitching). You should optimize the conversion rate by tweaking the presentation structure, content, call to action, etc…

For a typical online business selling a digital product (i.e. ebook, video course, etc…), you should focus on optimizing the sales letter by doing split testing for your headline, call to action, font color, warranty, different version of sales letter, etc… to achieve higher conversion rate. This is a powerful and important factor that will affect your sales. Even a slight increase of 1-2% will have a huge impact on the sales revenue. Let’s take a look at some numbers below:

No. Of Leads Conversion Rate No. Of Customers Dollar Spent ($) Revenue ($)
200 2% 4 $100 $400
200 3% 6 $100 $600

A slight increment of the conversion rate from 2% to 3% will result 1.5 times more revenue if the no. of leads is the same. This is a huge difference! So, always optimize the conversion rate to increase the revenue.

Product Price

This is the price of your product. There are 2 ways that you can do to bump up the revenue. The first one is obviously to increase the price. However, do bear in mind this is one of the factors that will affect the conversion rate. So, it is essential to do split testing for the pricing, which leads to the other way, reduce the price of your product.

It sounds contradicting but as I mentioned it is one of the factor that influences the conversion rate. Let’s look at some of the number below to compare:

No. Of Leads Conversion Rate No. Of Customers Dollar Spent ($) Revenue ($)
200 2% 4 $110 $440
200 2.5% 5 $90 $450

In the example above, a cheaper product result slightly higher conversion rate (2.5%) and overall increase the revenue by $10 for 200 leads. If the number of leads becomes 20,000, the difference will be $1,000. If this is the daily revenue, the monthly revenue will have a difference of $30,000 simply by changing the price tag.

Do bear in mind that a cheaper product might not increase the conversion rate. Sometimes, the conversion rate might decrease because people value products with higher price. This is similar to free information versus paid information. I am sure people will more likely to read and take action if they pay for it. So, pricing is another essential factor we need to test to optimize the revenue.

Number of Sales

If you sell more products to your customers, you will definitely bump up your revenue. If you don’t have other products, you can consider to joint venture with other business owners with similar size so that you can cross sell other products that will complement yours. For example, if you have run a website design company, SEO services will be a good fit to website design since a business owner with a website will love to increase his online presence.

You can negotiate a deal with the SEO services company such as to get certain % of commission of their services or to a flat fee for every lead you send to them. Also, did you use any of the voucher or loyalty card offered by the coffee shops to save some money? These are ways to increase the number of purchases!

For online business, you should optimize your thank you page by adding other products (yours or affiliate product) so that you can generate more revenue. The other thing you should do is to build a customer list so that you can follow up with them in your email. Whenever you have released a new product, you can send out an email to your existing customers. This is an essential way to build up your own “push button” atm.

It is always easier to sell to a existing customers than new leads. Big companies like Amazon and Apple do this everyday. So, we should definitely start building up a list.

What and how are you currently optimizing? Leave me a comment below to share your thoughts and ideas.

To Your Success,
Ming Jong Tey

4 Responses to “Ultimate Guide To Increase The Revenue Of Your Business”
Read them below or add one

  1. Caleb says:

    Another thing to do is start your own affiliate program and consider offering as much as 100 percent commissions so you can collect the buyer leads…

    This ties in to your last point because if you don’t build a customer list then every haphazard sales is just a one off thing while with a list you can market to the same prospects over and over. Of course there is an art to it but it is still doable by even a novice.
    Caleb recently posted..Starting An Affiliate Program – A Few Options

  2. Hi Ming Jong, I love it. Being the start of a new school year (in the UK anyway!) this is very pertinent as our thoughts turn to making the most of our businesses for the rest of 2012.

    This is such a simple formula but very powerful as your conversion rate increase shows. Just going from 1-2% gives you an extra $200 – scale that up and it’s very powerful.

    I’m focusing on traffic generation at the moment and then conversion. What do you think is most important when starting out (Traffic v conversion)?

    My 2c on that question: Getting more sales seems the obvious answer but we’re trained to build trust, relationships etc. as we build our lists, not just go in for the hard sell from day one. Or is that counter-intuitive? Some people will spend loads of time perfecting their products and sales funnels and then find they have very little traffic. So, I vote for building traffic first, then refining the sales funnel to increase conversions. But perhaps that’s why I’m not a millionaire yet, LOL!

    • Ming Jong says:

      @Cassie | Womenswaytowealth: Hi Cassie, it is a simple formula but yet it is so fundamental that I will just have to go back to visit from time to time to make sure I am doing the right thing and on the right track.

      Conversion rate is essential to the business because a small increment will result a big change. For starting out, I’ll think traffic is definitely the one to focus on. Unless you can drive sufficient traffic, you can’t really measure the conversion rate. For a squeeze page, it will be practical to get at least a few hundreds visitors before we can start optimizing the opt in rate. Similarly, for a sales page with a typical conversion rate of 2-3%, we also need a few hundreds if not thousands to start measuring.

      Majority of the people are struggling to get traffic when they get started and traffic has always been an issue (just look at the products out there in WSO and Clickbank). Like I mentioned, without significant traffic,it is hard to measure and improve the conversion rate. A lot of people draw the conclusion too early when there is obviously not enough traffic to the sales funnel. I share the same view with you, get enough traffic before optimizing the sales funnel.

      Getting sales and building trust can go concurrently in my opinion. It is how we tackle the sales funnel. There are a lot of ways to build trust and relationships without the hard selling. Some people choose to have an aggressive follow up email series for their subscribers. They can either opt out or buy the product to be transferred to a “buyer list”. Some opt for education email, useful blog post and pitching material mix around in the email follow up.

      Thanks for stopping by. Great to know your thoughts!
      Ming Jong recently posted..Fully Automated Online Business? The Right Way To Generate Passive Income

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